Plan to Change Student Lending Sets Up a Fight By DAVID M. HERSZENHORNPublished: April 12, 2009 WASHINGTON — The private student lending industry and its allies in Congress are maneuvering to thwart a plan by President Obama to end a subsidized loan program and redirect billions of dollars in bank profits to scholarships for needy students.

The plan is the main money-saving component of Mr. Obama’s education agenda, which includes a sweeping overhaul of financial aid programs. The Congressional Budget Office says replacing subsidized loans made by private banks with direct government lending would save $94 billion over the next decade, money that Mr. Obama would use to expand Pell grants for the poorest students.

But the proposal has ignited one of the most fractious policy fights this year.

Because it would make spending on Pell grants mandatory, limiting Congressional control, powerful appropriators are balking at it. Republicans say the plan is proof that Mr. Obama is trying to vastly expand government. Democrats are divided, with lawmakers from districts where lenders are big employers already drawing battle lines.

At the same time, the private loan industry, which would have collapsed without a government rescue last year, has begun lobbying aggressively to save a program that has generated giant profits with very little risk.

“The administration has decided that it wants to capture the profits of federal student loans,” said Kevin Bruns, executive director of America’s Student Loan Providers, a trade group that is fighting Mr. Obama’s plan.

To press its case, the nation’s largest student lender, Sallie Mae, has hired two prominent lobbyists, Tony Podesta, whose brother, John, led the Obama transition, and Jamie S. Gorelick, a former deputy attorney general in the Clinton administration.

For lenders, the stakes are huge. Just last week, Sallie Mae reported that despite losing $213 million in 2008, it paid its chief executive more than $4.6 million in cash and stock and its vice chairman more than $13.2 million in cash and stock, including the use of a company plane. The company, which did not receive money under the $700 billion financial system bailout and is not subject to pay restrictions, also disbursed cash bonuses of up to $600,000 to other executives.

Sallie Mae said that executive compensation was lower in 2008 than 2007 and that the stock awards were worthless in the current market.

Critics of the subsidized loan system, called the Federal Family Education Loan Program, say private lenders have collected hefty fees for decades on loans that are risk-free because the government guarantees repayment up to 97 percent. With the government directly or indirectly financing virtually all federal student loans because of the financial crisis, the critics say there is no reason to continue a program that was intended to inject private capital into the education lending system.

Under the subsidized loan program, the government pays lenders like Citigroup, Bank of America and Sallie Mae, with both the subsidy and the maximum interest rate for borrowers set by Congress. Students are steered to the government’s direct program or to outside lenders, depending on their school’s preference.

Private lenders say they still provide valuable service, marketing, customer relations, billing, default prevention and collection of delinquent loans. The lenders say the budget savings could be achieved without ending their role and are pushing to keep the system in place, including an arrangement approved by Congress last year by which they are paid to originate loans but can resell them to the government.

Martha Holler, a spokeswoman for Sallie Mae, said the company wanted a compromise. “To be clear, there are those who are fighting to preserve the historic financing structure for federal student loans,” she wrote in an e-mail message following up on a telephone interview. “Sallie Mae is not among them. In fact, we support constructive alternatives that would generate a similar level of taxpayer savings to achieve the administration’s important goals.”

Lenders are also emphasizing the jobs they provide.

Sallie Mae’s chief executive, Albert L. Lord, held a town-hall-style meeting last week at the company’s loan center in Wilkes-Barre, Pa., with two Democrats, Senator Bob Casey and Representative Paul E. Kanjorski, to announce the return of 2,000 jobs that were sent overseas in 2007.

Mr. Lord, in his opening speech, insisted that Mr. Obama’s proposal offered new opportunities, but he said he would fight to keep the current system mostly intact.

“We can either meet or beat the budget savings that are in the president’s budget with the exact same system that we have got working now with maybe a few tweaks,” he said.

But to preserve a profitable role for private lenders and still achieve Mr. Obama’s savings seems extremely difficult if not impossible; initial projections put forward by Sallie Mae could reach only 82 percent of the president’s goal over five years.

Last year, to keep education financing from drying up, Congress expanded the government’s role, including the repurchase of loans, which Sallie Mae and some other lenders say should be mandatory going forward.

“When you add that all up, a very legitimate question to ask is why do we even need private lenders,” said Representative Timothy H. Bishop, Democrat of New York and a former provost of Southampton College.

For Mr. Bishop and many other education advocates, Mr. Obama’s plan to expand the existing direct loan program used by more than 1,500 schools is obvious and long overdue.

But the administration has a fight on its hands. ===========Page 2 of 2)

“The president’s proposal,” Representative Allen Boyd, Democrat of Florida, said in a floor speech, “could be detrimental to thousands of employees who serve in the current student loan industry throughout this country, 650 of which are located in Panama City, Florida.”

In some states, student loans are administered by quasi-governmental agencies that benefit the same as private lenders. To appeal to these states, the administration has proposed $500 million a year for financial literacy programs and other services the agencies provide.

Political opposition may be harder to overcome.

Representative Howard P. McKeon of California, the senior Republican on the education committee, said Democrats should not cut out lenders. “A government-run, one-size-fits-all program is not the answer,” he said.

But some lawmakers have no sympathy for an industry now kept afloat by taxpayers.

“If the banks complain that they are getting cut out,” said Representative Barney Frank, Democrat of Massachusetts, “too bad.”

At the Wilkes-Barre event, Mr. Lord of Sallie Mae acknowledged his industry’s reliance on the government. “I don’t see private capital financing student loans, certainly any time soon,” he said.

Even as lenders fight the president’s plan, Sallie Mae and others are bidding for work that will remain if it is adopted — contracts for loan servicing and other back office operations.

The president’s plan would use the money from direct lending to help increase Pell grants and make them mandatory, with annual increases tied to inflation, providing a much-needed measure of certainty for students. That would limit Congressional control over the grants, an idea appropriators are not keen on, but the White House and Congressional leaders say they are open to negotiation.

Anticipating a ferocious legislative battle, Representative George Miller, Democrat of California and chairman of the education committee, is weighing all options.

“Chairman Miller’s priority is to make our federal student loan programs as reliable, sustainable and efficient as possible for students, families and taxpayers,” his spokeswoman, Rachel Racusen, said.

Barney Frank's track record as a financial analyst is, shall we say, mixed. The House Financial Services Chairman said for years that a collapse of Fannie Mae and Freddie Mac would pose zero risk to taxpayers. For most people, a mistake of that magnitude would trigger introspection, if not humility. But not the sage of Massachusetts. He's cooking up another fantastic subsidy -- and like the last one, he swears taxpayers won't feel a thing. In his words, "it would cost the federal government zero." Uh oh.

APBarney Frank.Mr. Frank believes state and local governments are paying too much when they issue debt because rating agencies don't give them the ratings Mr. Frank feels they deserve. So last year he pushed a bill to effectively force Standard &Poor's, Moody's and Fitch to raise their ratings on municipal bonds, but the legislation got sidetracked amid the financial turmoil. Now Mr. Frank is back, bigger than ever.

He'd like to create what he calls an FDIC-like federal insurance program for municipal bonds. Jurisdictions issuing debt would pay premiums into the insurance fund, and in return the federal government would guarantee the debt against default. Private companies already insure municipal bonds -- companies such as MBIA, Ambac and Berkshire Hathaway. And you may recall that last year the big bond insurers caused considerable angst when their exposure to mortgage-related debt called into question their ability to meet their muni-bond obligations. MBIA, in response, recently fenced off its muni-bond business from its other obligations.

If Mr. Frank really believes that state and local governments have been forced to overpay for this insurance, one has to assume his federal program would charge lower premiums and so undercut its private-sector competitors. The government can charge low premiums without putting taxpayers on the hook, he argues, because the risk of default is so low.

Or is it? The payment history of municipal bonds seems to support Mr. Frank. But then the triple-A ratings assigned to many mortgage-backed securities were also based on backward-looking models that failed to anticipate today's housing bust. The muni-bond performance record is also mostly the history of uninsured bonds. But the very existence of insurance can change the behavior of the policyholder or beneficiary -- watch Barbara Stanwyck and Fred MacMurray in the 1944 classic "Double Indemnity." If a state or locality knows someone else will make bondholders whole, they are far more likely to default than an uninsured issuer would be.

Many states and localities have run up huge pension and health-care obligations to retirees that will come due over the next few decades. And many of those obligations were underfunded even before the bottom fell out of the stock market. When those bills hit, cities will have to choose among raising taxes, cutting benefits or stiffing bondholders. In some states, such as New York, retiree benefits are constitutionally protected, and taxes are already chokingly high. So stiffing the bond insurers will look pretty attractive.

None other than Warren Buffett devoted several pages in his latest Berkshire Hathaway shareholder letter to precisely this kind of risk: "When faced with large revenue shortfalls, communities that have all of their bonds insured will be more prone to develop 'solutions' less favorable to bondholders than those communities that have uninsured bonds held by local banks and residents."

He continues: "Losses in the tax-exempt arena, when they come, are also likely to be highly correlated among issuers. If a few communities stiff their creditors and get away with it, the chance that others will follow in their footsteps will grow. What mayor or city council is going to choose pain to local citizens in the form of major tax increases over pain to a far-away bond insurer?" This goes double if the insurer is Uncle Sugar.

Mr. Buffett concludes: "Insuring tax-exempts, therefore, has the look today of a dangerous business -- one with similarities, in fact, to the insuring of natural catastrophes. In both cases, a string of loss-free years can be followed by a devastating experience that more than wipes out all earlier profits."

The difference, in this case, is that bond insurance, and especially federal bond insurance, would have helped create the "natural" catastrophe by encouraging jurisdictions to rack up obligations that taxpayers would be forced to make good on down the road. As for Mr. Frank's contention that muni-bond insurance is too expensive, Berkshire Hathaway is charging two and three times historical rates -- and Mr. Buffett is still worried.

One Fannie Mae debacle ought to be enough for any career, but Mr. Frank wants taxpayers to double down on his political guarantees. There are currently some $1.7 trillion in municipal bonds held by the public, and Barney thinks we can insure them at "zero cost." Considering the source, and the potential size of the bill, someone in Congress needs to sound the alarm

One of the scariest parts of all these is the meme that it was deregulation instead of govt meddling (the FMs, the CRA, negative interest rates, etc) that laid the groundwork for all this (see e.g. the professor's conclusion) has become accepted truth

One of the scariest parts of all these is the meme that it was deregulation instead of govt meddling (the FMs, the CRA, negative interest rates, etc) that laid the groundwork for all this (see e.g. the professor's conclusion) has become accepted truth

Yeah, and that more government intervention is the cure, as though the current government intervention has proved effective.

Senator Feinstein's husband cashes in on crisisOn the day the new Congress convened this year, Sen. Dianne Feinstein introduced legislation to route $25 billion in taxpayer money to a government agency that had just awarded her husband's real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms.Mrs. Feinstein's intervention on behalf of the Federal Deposit Insurance Corp. was unusual: the California Democrat isn't a member of the Senate Committee on Banking, Housing and Urban Affairs with jurisdiction over FDIC; and the agency is supposed to operate from money it raises from bank-paid insurance payments - not direct federal dollars.

Documents reviewed by The Washington Times show Mrs. Feinstein first offered Oct. 30 to help the FDIC secure money for its effort to stem the rise of home foreclosures. Her letter was sent just days before the agency determined that CB Richard Ellis Group (CBRE) - the commercial real estate firm that her husband Richard Blum heads as board chairman - had won the competitive bidding for a contract to sell foreclosed properties that FDIC had inherited from failed banks.About the same time of the contract award, Mr. Blum's private investment firm reported to the Securities and Exchange Commission that it and related affiliates had purchased more than 10 million new shares in CBRE. The shares were purchased for the going price of $3.77; CBRE's stock closed Monday at $5.14.

The following hints of further excrement storms about to hit the fan. Combine with bad news in the Euro banking pipeline, and I find myself wondering if we have not yet seen the bottom in the market.==================

Alex Wong/Getty ImagesA man walks on the grounds of Freddie Mac headquarters in McLean, Va., on April 22SummaryThe acting chief financial officer of the U.S. government-backed Federal Home Loan Mortgage Corporation (also known as “Freddie Mac”), David Kellermann, was found dead in his home April 22. Kellermann’s death — which police are calling an apparent suicide — raises many questions about what Kellermann knew and how his death will affect the future of Freddie Mac.

AnalysisRelated LinkThe Financial Crisis in the United States David Kellermann, the acting chief financial officer of the U.S. government-backed Federal Home Loan Mortgage Corporation (also called “Freddie Mac”) was found dead on April 22. Police in Vienna, Va., have said the death may be a suicide. According to reports from media quoting unnamed police sources, Kellermann was found hanged in the basement of his home. The details on Kellermann’s death are still forthcoming and until an official autopsy is conducted the exact cause of death, and circumstances surrounding it, will remain unknown.

Kellermann was named a senior vice president and acting chief financial officer at Freddie Mac in the September 2008 government-initiated shake up. Prior to holding those posts he was the principal accounting officer and corporate controller — essentially the main accountant — for the mortgage giant. He was one of the longest-tenured members of the current, and government-revamped, Freddie Mac executive board and had worked for the institution for 16 years.

Freddie Mac is a government-created and state-sponsored institution designed to supplement the secondary market for U.S. mortgages. It buys mortgages from banks that issued them to consumers, often packaging them into blocks and then chopping those blocks into securities that investors buy and resell. The idea behind government-sponsored enterprises like Freddie Mac is to generate demand in a secondary market, and thus to increase the overall pool of money available for U.S. mortgage lending.

However, many of the mortgage tranches that were packaged into securities were precisely the sort of assets at the root of the financial meltdown that became the subprime mortgage crisis. Freddie Mac and its sister institution the Federal National Mortgage Association (also known as “Fannie Mae”) own almost half of the approximately $12.1 trillion U.S. market for residential mortgages and securities. Because of their unwieldy size and growing instability, the government stepped in and took the two institutions under conservatorship in September 2008 to prevent a complete meltdown of the financial system.

Part of the government’s plan for Freddie Mac was to take over the institution, replace the leadership and start sifting through the incomprehensible maze of packaged mortgages that were sold to investors as mortgage backed securities. With Kellermann’s death, however, this task — which was already approaching Sisyphean proportions — becomes most likely impossible.

Kellermann was not an outside appointee; he was promoted from within and represents the core institutional memory of Freddie Mac. Most importantly, he represents the accounting institutional memory, which means that he not only most likely knew about all of the bad decisions that were made regarding securitization, but also knew of them as they were being made. Under any circumstances, in any organization, the loss of a person of Kellermann’s stature would be crippling; under the circumstances at Freddie Mac, it is catastrophic.

The death of Freddie Mac’s most important accounting and financial employee now puts the government’s plans for Freddie Mac’s continued existence into question. Assets held by Freddie Mac are still very valuable; only a small percentage of the entire mortgage market is actually non-performing (although defaults are rising due to the effects of the recession) and far from all of that is in foreclosure, so there is a lot of value left in the institution. Without possession of first-hand knowledge to trace back and unwind the process through which securities were created, there would be little point in maintaining Freddie Mac as a single institution. It could get broken up by the government and sold in pieces, letting private investors sift though much smaller chunks of the mess on their own time.

What this would mean for the mortgage market is at present unclear. With total assets of $2.2 trillion, Freddie Mac would be the biggest institution the U.S. government has ever dismantled. But the real kicker is that this would be just the prelude to an even bigger unwinding. Everything that has beset Freddie Mac has also plagued its sister company, Fannie Mae — which has $3.11 trillion in total assets and is also in conservatorship.

As we sort out the disaster that was Bank of America's TARP-funded purchase of Merrill Lynch, read this remarkable passage from the testimony that bank CEO Kenneth Lewis gave to New York's attorney general:

Q: Wasn't [treasury Secretary Hank] Paulson, by his instruction, really asking Bank of America shareholders to take a good part of the hit of the Merrill losses?

Mr. Lewis: What he was doing was trying to stem financial disaster in the financial markets from his perspective.

Q: From your perspective, wasn't that one of the effects of what he was doing?

Mr. Lewis: Over the short term, yes, but we still thought we had an entity that filled two big strategic holes for us and over long term would still be an interest to the shareholders.

Q: So isn't that something that any shareholder at Bank of America who had less than a three-year time horizon would want to know?

Mr. Lewis: The situation was that everyone felt like the deal needed to be completed and to be able to say that, or that they would impose a big risk to the financial system if it would not.

Q: When you say "everyone," what do you mean?

Mr. Lewis: The people that I was talking to, [Fed Chairman Ben] Bernanke and Paulson.

Q: Had it been up to you would you made the disclosure?

Mr. Lewis: It wasn't up to me.

Q: Had it been up to you.

Mr. Lewis: It wasn't.

Q: Why do you say it wasn't up to you? Were you instructed not to tell your shareholders what the transaction was going to be?

Mr. Lewis: I was instructed that "We do not want a public disclosure."

Q: Who said that to you?

Mr. Lewis: Paulson.

If you believe one of the causes of the crisis is the principal agent problem -- what happens when a company's representatives act more for themselves than for the organization's long-term interests -- then this should be yet another alarming moment. The government pressured a corporation's chiefs to take a very risky move while keeping the company's nominal owners in the dark. The end result was a big bailout for Bank of America (and a big payday for Merrill Lynch executives).

Don't think for a second that this was an enormous aberration. At a time when many of us are looking for ways to make owners more responsible for a company's fortunes, public policy is pushing us in the opposite direction: The government has been shielding companies from the consequences of their actions, and it has been inserting itself into their internal policies. The effect is to shift both fiscal liability and decision-making authority into the hands of the state, leaving owners even further removed from the risks being taken in their name.

Today, on a party-line vote, the House of Representatives approved the Local Law Enforcement Hate Crimes Prevention Act, a.k.a. the Matthew Shepard Act. The bill, which President Obama supports, would add offenses committed "because of" a victim's actual or perceived gender, sexual orientation, gender identity, or disability to the list of "hate crimes" that can be prosecuted under federal law. It also would remove a provision limiting such prosecutions to cases where the victim was participating in a "federally protected" activity such as education or voting. The new federal nexus requirement is so laughably accommodating that it might as well have been left out. A violent crime against a victim selected for one of the mentioned reasons can be federalized if it "occurs during the course of, or as the result of, the travel of the defendant or the victim...across a State line or national border"; if the defendant "uses a channel, facility, or instrumentality of interstate or foreign commerce"; if "the defendant employs a firearm, explosive or incendiary device, or other weapon that has traveled in interstate or foreign commerce"; if the crime "interferes with commercial or other economic activity in which the victim is engaged at the time of the conduct"; or if the crime "otherwise affects interstate or foreign commerce."

Aside from the usual problems with hate crime laws, which punish people for their ideas by making sentences more severe when the offender harbors politically disfavored antipathies, this bill federalizes another huge swath of crimes that ought to be handled under state law, creating myriad opportunities for double jeopardy by another name. The changes would make it much easier for federal prosecutors who are displeased by an acquittal in state court to try, try again, as they did in the Rodney King and Crown Heights riot cases. They simply have to argue that the crime was committed "because of" the victim's membership in one of the listed groups. As four members of the U.S. Civil Rights Commission point out in a recent letter opposing the bill (noted by Hans Bader), that description could apply to a wide range of ordinary crimes:

Rapists are seldom indifferent to the gender of their victims. They are virtually always chosen "because of" their gender. A robber might well steal only from women or the disabled because, in general, they are less able to defend themselves. Literally, they are chosen "because of" their gender or disability."

If all rape and many other crimes that do not rise to the level of a "hate crime" in the minds of ordinary Americans are covered by LLEHCPA, then prosecutors will have "two bites at the apple" for a very large number of crimes.

The text of the bill is here. I criticized the proposed expansion of federal hate crime law in a 1998 column. More on that subject here. I explored the more general problems with hate crime laws in a 1992 Reason article. I slammed the Rodney King and Crown Heights do-overs here and here. In 2004 William Anderson and Candice Jackson decried the federalization of crime.

Geopolitical Diary: Chrysler Files for BankruptcyMay 1, 2009U.S. President Barack Obama announced Thursday that automaker Chrysler filed for Chapter 11 bankruptcy, allowing it to restructure its debts and consolidate profitable assets into a new company. At the heart of the deal is an agreement with Italian carmaker Fiat, which will take an initial 20 percent stake in Chrysler. Fiat has an option to increase its holdings to 35 percent if certain performance criteria are met (such as bringing a fuel-efficient engine family to the U.S.-manufactured Chryslers and allowing Chrysler to use its global distribution network), and it could become Chrysler’s majority owner by 2016. As part of the bankruptcy deal, the U.S. government will take an 8 percent stake in the automaker, while the Canadian federal and Ontario provincial governments together will take a 2 percent stake.

Chrysler has 54,000 employees, and that – combined with the ramifications for the U.S. automotive supplier industry, particularly in the manufacturing states of the Midwest – makes the company’s fate a deeply political issue within the United States. But the impact of the bankruptcy will be felt in other countries also. In fact, the U.S. plan for Chrysler hinges on a transfer of technology from Europe, meant to help the beleaguered company learn the ways of small and efficient automobile manufacturing. The irony is that Chrysler intends to keep Jeep and Dodge — neither of which are considered small or efficient — as the core assets of its new fleet.

A further irony is that Chrysler has turned to the Italian automaker Fiat, which has had financial difficulties of its own, for manufacturing and business acumen. In Europe, Fiat’s vehicles have suffered decades of image problems, depressing the price that the Turin-based company can ask for its cars. Furthermore, Fiat went through exceedingly difficult times in 2003 and 2004, when (again ironically) it was General Motors that was nearly forced to bail the company out. By 2005, Fiat was in such dire straits that it exercised an option to sell its car division to the American manufacturer, forcing GM to buy it at market price. But GM was so wary of Fiat’s enormous debt and unimpressed by the car division that it chose to pay a $2 billion penalty instead of taking ownership.

Further questions arise over the impact that the Chrysler bankruptcy will have on U.S. neighbors Canada and Mexico. For Canada, the key is Ontario’s manufacturing sector, which accounts for 42,000 assembly and 75,000 auto parts supplier jobs. Having suffered heavy job losses in both sectors in 2007 and 2008, the minority Conservative government cannot allow further economic hardship to strike in Ontario — the government already has faced multiple challenges from the Canadian Liberal Party during its tenure.

For Mexico, the matter is more than political: It is a matter of life and death. The auto-manufacturing sector employs roughly 450,000 people — 100,000 in Ciudad Juarez alone. Juarez is at the center of a drug war that has pitted the Mexican army and federal law enforcement against several cartels, which also are battling each other for control over key drug transshipment points into the United States. Massive layoffs in the automotive sector would create a large pool of disaffected but able-bodied people, who would be great recruits for the cartels. The situation also could widen the rift between the notoriously rebellious and independent-minded residents of Chihuahua and the federal government in Mexico City, complicating efforts by federal law enforcement to conduct operations in Juarez.

The financial burden of a potential collapse of the automotive sector would only add to several economic and social problems that Mexico faces. Mexico is suffering from the impact of swine flu, substantial decline in remittances from emigrants living abroad and low prices for its energy exports — which the government depends on for about 40 percent of tax revenue. Added to this would be the cost of a program that obligates the government to pick up one-third of autoworkers’ salaries when companies suspend factory operations.

The implications of the U.S. auto industry developments for Mexico and Canada will not be clear until the situation regarding GM – which also has been faltering — is resolved. A restructuring plan for GM as well as Chrysler could add to the implications for auto suppliers in the United States and its immediate neighbors in North America. But GM has a much more extensive network than Chrysler does outside of North America — with significant operations in Europe (Austria, Belgium, France, Germany, Poland, Russia, Spain, Sweden and the United Kingdom), South America (Argentina, Brazil, Chile, Colombia, Ecuador and Venezuela), Africa (Egypt and South Africa), Asia (China, India, Indonesia, Japan, Korea and Thailand) and Australia. The possibility of a GM bankruptcy has already soured relations between the Obama administration and the German government, which refuses to rescue GM’s Opel division. That issue has had political ramifications, months ahead of the German election in September.

Given GM’s global reach, the potential collapse of that company, following the Chrysler bankruptcy filing, would cause shock waves for a number of countries and leave their governments to deal with the domestic effects. And that might sour the Obama administration’s relations with some key allies in the future.

Just wanted to offer my street knowledge as an inner city landlord that the conversion rate to trade EBT dollars (government paid cash card) for real currency is 50 cents on the dollar. The card spends like cash but is limited to items like groceries; important things like cigarettes require real money. Unfortunately the taxpayer pays double. Just like tax loopholes and campaign finance laws, money finds a way.

May 5, 2009Job Corps: An Unfailing Record of Failureby David B. Muhlhausen, Ph.D.WebMemo #2423During his Presidential radio address to the nation on April 18, 2009, President Barack Obama declared that:

In the coming weeks, I will be announcing the elimination of dozens of government programs shown to be wasteful or ineffective. In this effort, there will be no sacred cows, and no pet projects. All across America, families are making hard choices, and it's time their government did the same.[1]

President Obama is correct to call for wasteful and ineffective programs to be placed on the chopping block. One such program is Job Corps, a job-training program for disadvantaged youth. The federal government spends about $1.5 billion per year on Job Corps and scientific evaluations have demonstrated that the federal government gets little in return on its investment. Based on this evidence, President Obama and Congress should move to eliminate this wasteful and unproductive program.

Evaluations of Job Corps

A recent impact evaluation of Job Corps ("2008 outcome study"), published in the December 2008 issue of the American Economic Review, is a follow-up to previous evaluations of the program.[2] The 2008 outcome study is based on a randomized experiment—the "gold standard" of scientific research—to assess the impact of Job Corps on participants compared to similar individuals who did not participate in the program.[3]

For a federal taxpayer investment of $25,000 per Job Corps participant,[4] the 2008 outcome study found:

Compared to non-participants, Job Corp participants were less likely to earn a high school diploma (7.5 percent versus 5.3 percent);[5]Compared to non-participants, Job Corp participants were no more likely to attend or complete college;[6]Four years after participating in the evaluation, the average weekly earnings of Job Corps participants was $22 more than the average weekly earnings of the control group;[7] andEmployed Job Corps participants earned $0.22 more in hourly wages compared to employed control group members.[8]If Job Corps actually improves the skills of its participants, then it should have substantially raised their hourly wages. However, a $0.22 increase in hourly wages suggests that Job Corps does little to boost the job skills of participants.

Other impact evaluations of Job Corps have found similar results. In 2001, The National Job Corps Study: The Impacts of Job Corps on Participants' Employment and Related Outcomes ("2001 outcome study"), measured the impact of Job Corps on participants' employment and earnings.[9] While the 2001 outcome study found some increases in the incomes of participants, the gains were trivial. For example, compared to non-participants, the estimated average increase in the weekly incomes of all participants over four years was never more than $25.20.[10]

Another evaluation, The National Job Corps Study: Findings Using Administrative Earnings Records Data ("2003 study"), was published in 2003, but the Labor Department withheld it from the general public until 2006.[11] The 2003 study found that Job Corps participation did not increase employment and earnings. Searching for something positive to report, the 2003 study concludes that "There is some evidence, however, of positive earnings gains for those ages 20 to 24."[12]

Why Withhold the 2003 Study?

Based on survey data, the 2001 cost-benefit study contained in the 2001 outcome study assumed that the gains in income for participants will last indefinitely, a notion unsupported by the literature on job training.[13] But included in the 2003 study is a cost-benefit analysis that directly contradicts the positive findings of the 2001 cost-benefit study.

The 2003 study used official government data, instead of self-reported data, and used the more reasonable assumption that benefits decay, rather than last indefinitely.[14] Contradicting the 2001 cost-benefit study, the 2003 study's analysis of official government data found that the benefits of Job Corps do not outweigh the cost of the program. Even more damaging, the 2003 study re-estimated the 2001 cost-benefit study with the original survey data using the realistic assumption that benefits decay over time. According to this analysis, the program's costs again outweighed its benefits.

Is Job Corps Worth $1.5 Billion Per Year?

Some argue that Job Corps is worth $1.5 billion per year because there is "some evidence" of positive income gains for those aged 20 to 24.[15] This belief is based on the findings that these participants had consistently higher annual incomes from 1998 to 2001 than non-participants of similar age.[16] But this conclusion is questionable. In 1998, participants aged 20 to 24 experienced an average increase in annual income of $476 that, by traditional scientific standards, is statistically significant, meaning that the income gains are very likely attributable to Job Corps. For the remaining years, the income gains were positive, ranging from $429 to $375, but statistically insignificant, meaning that the findings cannot be attributed to participation in Job Corps. Thus, it cannot be concluded that Job Corps consistently raised the incomes of participants aged 20 to 24.

By the logic of the 2003 study, a stronger case can be made that Job Corps consistently reduced the incomes of female participants without children. In 1998 and 1999, childless female participants earned $1,243 and $1,401 less, respectively, than similar non-participants.[17] These findings are statistically significant, suggesting that Job Corps had a harmful effect. In 2000 and 2001, the earnings of childless female participants were still beneath those of their counterparts, but the differences are statistically insignificant, indicating that the declines in income are not attributable to Job Corps—just like most of the income gains for participants aged 20 to 24 in the 2003 study.

A Predictable Failure

The findings of the 2008 outcome study are not surprising because previous research has consistently found Job Corps to be ineffective at substantially increasing participants' wages and moving them into full-time employment.[18]

The 2001 outcome study revealed that Job Corps had little impact on the number of hours worked per week. During the course of the study, the average time participants spent working each week never rose above 28.1 hours.[19] Average participants never worked more than two hours longer per week than those in the control group.[20]

Job Corps does not provide the skills and training necessary to substantially raise the wages of participants. Costing $25,000 per participant over an average participation period of eight months, the program is a waste of taxpayers' dollars.

An Ideal Candidate for the Budget Chopping Block

Given the program's poor performance and President Obama's call for "the elimination of dozens of government programs shown to be wasteful or ineffective," Job Corps is an ideal candidate for the budget chopping block.

David B. Muhlhausen, Ph.D., is Senior Policy Analyst in the Center for Data Analysis at The Heritage Foundation.

[4]Job Corps serves about 60,000 new participants each year with an annual appropriation of approximately $1.5 billion.Thus, the average cost per participant is about $25,000. See Schochet et al., "Does Job Corps Work?" p. 1864.

WASHINGTON – The Obama administration wants to cut almost in half a benefits program for the families of slain police and safety officers.The president's proposed budget calls for cutting the Public Safety Officers' Death Benefits Program from $110 million to $60 million.The Justice Department insisted no one would lose benefits."Any family member who is eligible for benefits under this program will receive them," said Justice Department spokeswoman Melissa Schwartz.Budget documents say the reduction is being made because "claims are anticipated to decrease," apparently because the number of officers killed in the line of duty has been decreasing.The proposal is being made just days before Attorney General Eric Holder is expected to attend ceremonies in Washington honoring slain officers."It makes us kind of nervous. While we aren't panicking, it certainly has increased our concern, coming a week before National Police Week," said Suzie Sawyer, executive director of Concerns of Police Survivors, a group taking part in next week's events.Sawyer said as long as the number of police and safety officers killed doesn't increase too much, the amount of money offered in the budget could be enough. And she noted that in the past, the government has found more money for the program when it needed more, such as following the Sept. 11, 2001 terror attacks.The program pays benefits of more than $300,000 to the survivors of a safety officer killed in the line of duty.There were 133 police officers killed in the line of duty last year, the lowest amount since 1960, according to the National Law Enforcement Officers Memorial Fund.The group said killings of police officers are up 21 percent so far in 2009, compared to the same period the year before.

Glenn Beck reported last night that spending on devices to detect radioactivity for our harbors has been cut

Obama unveiled a budget Thursday with a 2010 price tag of $3.5 trillion financed with $1.2 trillion of new debt. For domestic agencies, that's a 9.3% spending hike over last year.

AP Mr. Obama and his advisers know the public won't accept gigantic governmental expansions without at least some effort to pare the waste in Washington. So they scrubbed "line by line" through this historically huge budget and identified $16.7 billion of budget savings. This is less than a penny, about 0.47 cents, of savings out of every dollar Uncle Sam will spend this year. And these aren't real savings that will reduce debt, because Congress has already fixed the budget totals. Thus, each dollar saved from the African Development Foundation gets reallocated to some other foreign aid program.

To be fair, most of the 121 program "terminations, reductions and savings" that the President recommends make good sense, and we wish Congress godspeed in eliminating them. By all means have done with the Denali Job Training program (savings of $3 million) and USDA Public Broadcasting Grants ($5 million), and payments to high-income farmers ($58 million).

But Mr. Obama's war on government waste looks like a war on paper clips. Three-quarters of the cuts come from the national defense budget, not domestic agencies. Of the 10-year savings of $71 billion in entitlement programs -- now with a mind-numbing $62.9 trillion unfunded liability over the long-term -- one-third of the cutbacks aren't cuts at all. They are tax increases, mostly on the oil and gas industry.

One cut gives the word "savings" new meaning. The Obama budget will "save" taxpayers $290 million a year by increasing the IRS enforcement agency budget by $890 million. "Targeted enforcement resources more than pay for themselves," says the budget, in the first case of dynamic scoring by the Democrats since the Kennedy Administration.

Mr. Obama has scoffed at critics who complain these savings are inconsequential. "I guess that's considered trivial," he explained. "Outside of Washington [$17 billion] is still considered a lot of money." Yes, Mr. Obama himself signed a budget bill with 9,000 earmarks costing more than $13 billion and then justified the expenditure by declaring these levels of waste minor in the grand scheme of things.

We now live in a time when tens of billions of dollars has become a blip or rounding error in the federal budget. The Administration has said it's time to take action in reducing America's "$12 trillion American Express bill." We agree, but at this pace, with $16.7 billion of savings a year and even assuming no new debt, it will take centuries to pay off Uncle Sam's credit card.

An article from CNN highligting the fact that the state department can't afford to pay local staff in foreing US embassies a competitive salary anymore. How will Obama keep the west safe if he is cutting back on all the things that protect us?

I’m no conspiracy theorist, but unless they are wanting logs on exactly where we’ve been, it would be much cheaper, and easier, to use the existing OBD-II interface on cars to track total mileage. I guess GPS jammers are going to become very popular soon.

I give Soros credit for putting up some money. Why he thinks it ok to confiscate tax payer money for the rest though I disagree with. Why not just buy the books supplies and uniforms and pass out at school rather than hand out cash to people with the promise they will use it for school supplies?

That is a joke.

Another politically correct adorable program that is wasted IMHO.Oh sure the government can do these things.

****Back to school spree: Billionaire, feds give out $175M to aid neediest students around the state BY Erica Pearson, Tanyanika Samuels, Kenneth Lovett and Adam Lisberg DAILY NEWS STAFF WRITERS

Wednesday, August 12th 2009, 8:14 AM

Billionaire George Soros speaks at P.S. 208 in Harlem where he announced a $35 million gift for low-income families in New York to purchase supplies and clothing for the new school year.

Roberta Aguilar and her daughter Lilly Gomez (11) plan to buy a uniform for her first day of school wait at the Chase Bank on Junction Blvd in Queens. People wait to receive 200 dollars given to disadvantaged families for school supplies. Take our PollSoros, feds hand out $175M to needy NY kidsA $200 back-to-school giveaway for needy kids sparked a mad rush for money on the streets of New York on Tuesday.

"It's free money!" said Alecia Rumph, 26, who waited in a Morris Park, Bronx, line 300 people deep for the cash to buy uniforms and book bags for her two kids.

"Thank God for Obama. He's looking out for us."

Thousands of people lined up at banks and check-cashing shops to withdraw the cash that magically appeared on their electronic benefit cards.

Some rushed out because of rumors the money would vanish by the end of the day.

"Rumors, there's always rumors," said Teresa Medina, who waited four hours at a Pay-O-Matic in Clinton Hill, Brooklyn, to get $600 for her three teenagers - just in case they were true.

The no-strings-attached money went to families receiving food stamps or welfare.

Every child between 3 and 17 was eligible for $200, which worked out to 813,845 kids across the state - including 498,866 in the city. "Times are really tough right now. The situation is bad with money. So it's easy to want to use the money for other things," said Ana Barcos, 31, of Corona, Queens, where 200 people waited outside a check-cashing business.

"But if the money's supposed to be for my kids, then I will use it for my kids."

Billionaire philanthropist George Soros gave $35 million toward the program, with $140 million in federal stimulus funds routed through state government making up the rest.

"It's a help," said Tania Gomez of Chelsea, who withdrew $600 for her kids. "Every penny counts nowadays. It's really something that was unexpected."

Storekeepers were glad to hear about the program, too - and the notebooks, clothes and backpacks it would buy.

"It's good for everyone," said Aziz Boughroum, 31, who works at Stevdan Pen & Stationers in the West Village.

Gov. Paterson and Mayor Bloomberg joined Soros to announce the payments at Public School 208 in Harlem, where the billionaire reminisced that as a penniless student in London, he survived because of a handout he got from Quakers.

"This gift has a special personal meaning to me, because I was once also a recipient of charity," Soros said in a choking voice. "I'm very pleased that I'm able to repay what they gave me."

Paterson's Republican critics blasted the giveaway, saying he should spend the money to reduce property taxes.

"It is a plan that is ripe for fraud and abuse," said Senate Republican leader Dean Skelos. "This is a totally irresponsible use of federal stimulus money."

To borrow a phrase from Howard Beale, Americans are mad as hell, and they're not going to take it any more.

If you don't believe us, participate in one of those (increasingly) infrequent town hall meetings, hosted by Democratic Congressmen. When those events were first scheduled, members of the House and Senate were expecting a modest turnout, with supporters of health reform out-numbering opponents.

So much for political calculations. Judging from the sound bites we heard today, the American public is still upset, and ready to send scores of politicians packing.

But it's not just health care that has pushed ordinary citizens past the point of no return. In today's edition of The Wall Street Journal, John Fund notes the firestorm that greeted Congressional plans to expand the government fleet of private jets.

And that's just the tip of the iceberg; coming next, a public eruption over un-reimbursed per diem--travel money paid to members of the Senate and House for food and lodging expenses overseas. But in many cases, those expenses are paid by the host country or other government organizations. When that happens, members of Congress are supposed to reimburse the government, but that almost never happens.

How much money are we talking about? On longer trips (or jaunts to pricey locales), the tab can reach $3,000 for each Congressman, Senator, or staff member. Multiply that by scores of visits, and pretty soon, you're talking about real money.

About what you'd expect from a group Mark Twain aptly described as "America's native criminal class."

The 2009 deficit is projected to be $1.977 trillion. This is almost 12 times more than the deficits in the 1980s, 45 times the deficits in 1990s and nearly 8 times more than than deficits in the 2000s.

A multi-trillion dollar deficit is unsustainable and one of the most dangerous threats to the Country. The Obama Administration and Congress should shelve the Healthcare and Global Warming Bills and concentrate on the chronic economic problems that plague us. Page Printed from: http://www.americanthinker.com/blog/2009/08/federal_spending_deficit_explo.html at August 20, 2009 - 09:15:34 AM EDT

Americans are about to re-learn that bank deposit insurance isn't free, even as Washington is doing its best to delay the coming bailout. The banking system and the federal fisc would both be better off in the long run if the political class owned up to the reality.

We're referring to the federal deposit insurance fund, which has been shrinking faster than reservoirs in the California drought. The Federal Deposit Insurance Corp. reported late last week that the fund that insures some $4.5 trillion in U.S. bank deposits fell to $10.4 billion at the end of June, as the list of failing banks continues to grow. The fund was $45.2 billion a year ago, when regulators told us all was well and there was no need to take precautions to shore up the fund.

.The FDIC has since had to buttress the fund with a $5.6 billion special levy on top of the regular fees that banks already pay for the federal guarantee. This has further drained bank capital, even as regulators say the banking system desperately needs more capital. Everyone now assumes the FDIC will hit banks with yet another special insurance fee in anticipation of even more bank losses. The feds would rather execute this bizarre dodge of weakening the same banks they claim must get stronger rather than admit that they'll have to tap the taxpayers who are the ultimate deposit insurers.

It isn't as if regulators don't understand the problem. Earlier this year they quietly asked Congress to provide up to $500 billion in Treasury loans to repay depositors. The FDIC can draw up to $100 billion merely by asking, while the rest requires Treasury approval. The request was made on the political QT because, amid the uproar over TARP and bonuses, no one in Congress or the Obama Administration wanted to admit they'd need another bailout.

But this subterfuge can't last. Eighty-four banks have already failed this year, and many more are headed in that direction. The FDIC said it had 416 banks on its problem list at the end of June, up from 305 only three months earlier. The total assets of banks on the problem list was nearly $300 billion, and more of these assets are turning bad faster than banks can put aside reserves to account for them. The commercial real-estate debacle is still playing out at thousands of banks, even as the overall economy bottoms out and begins to recover.

Meantime, even as it "resolves" and then sells failed banks, the FDIC is also guaranteeing the buyers against losses on tens of billions of acquired assets. This is known in the trade as "loss sharing," which is another form of taxpayer guarantee that taxpayers aren't supposed to know about. Most of the losses won't be realized if the economy recovers. But this too is a price of taxpayers guaranteeing deposits. Even as Treasury and the press corps broadcast that the feds are making money on TARP repayments, these guarantees go largely unnoticed.

FDIC Chairman Sheila Bair continues to say that deposits will be covered up to the $250,000 per account insurance limit, and of course she's right. But we wish she'd force Congress—and the American public—to face up to the reality of what deposit insurance costs. Amid the panic last year, Congress raised the deposit limit from $100,000. While this may have calmed a few nerves—though the worst runs were on money-market funds, not on banks—it also put taxpayers further on the hook.

The $250,000 limit was supposed to expire at the end of 2009, but in May Congress extended it through 2013, and no one who understands politics thinks it will return to $100,000. The rising bank losses mean that the FDIC's ratio of funds to deposits is down to 0.22%, far below its obligation under the insurance statute to keep it between 1.15% and 1.50%.

Rather than further soak capital from already weak banks, the FDIC ought to draw down at least $25 billion from its Treasury line of credit. Ms. Bair is going to have to ask for the cash sooner or latter, and she might as well do it before the fund hits zero and we get another round of even mild depositor anxiety. We suppose Congress could raise a faux fuss, but these are the same folks who ordered the FDIC to broaden the insurance limit. They need to face the political consequences of their promises.

I guess the economy is just going to collapse.I hear no one stating the obivous - less doles, less pulbic pensions, social security/medicare at age 70 not younger etc.Otherwise we are done as we know it.

Illegals out of the country - Americans taking their jobs for less. We have to get more people off the dole and get them working.

As for my part doctors making less - although as it is my expenses are already sky high.

President Barack Obama and the Democratic-controlled Congress are considering sweeping legislation that will provide new benefits for many Americans.

The Americans With No Abilities Act (AWNAA) is being hailed as a major legislative goal by advocates of the millions of Americans who lack any real skills or ambition.

"Roughly 60 percent of Americans do not possess the competence and drive necessary to carve out a meaningful role for themselves in society," said California Senator Barbara Boxer. "We can no longer stand by and allow People of Inability (POI) to be ridiculed and passed over. With this legislation, employers will no longer be able to grant special favors to a small group of workers, simply because they are competent and have some idea of what they are doing."

In a Capitol Hill press conference, House Majority Leader Nancy Pelosi and Senate Majority Leader Harry Reid pointed to the success of the U.S. Postal Service, which has a long-standing policy of providing opportunity without regard to job performance. Approximately 74 percent of postal employees lack any job skills, making this agency the single largest U.S. employer of Persons of Inability (POI). Private-sector industries with good records of non-discrimination against "the inept" include retail sales (72%), the airline industry (68%), and home improvement warehouse stores (65%). All levels of the state government, especially the Department of Motor Vehicles also has an excellent record of hiring Persons of Inability (63%).

Under AWNAA, more than 25 million mid-level positions will be created, with important-sounding titles but little real responsibility, thus providing an illusory sense of purpose and performance. Mandatory non-performance-based raises and promotions will be given so as to guarantee upward mobility for even the most unremarkable employees.

The legislation provides substantial tax breaks to corporations that promote a significant number of Persons of Inability intomiddle-management positions, and gives a tax credit to small and medium-sized businesses that agrees to hire one clueless worker for every two talented hires.

Finally, the AWNAA contains tough new measures to make it more difficult to discriminate against the non-able, banning, forexample, discriminatoryinterview questions such as, "Do you have any skills or experience that relate to this job?"

"As a non-able person, I can't be expected to keep up with those frigging people who have something going for them," said Mary Lou Gertz, who lost her position as a lug-nut twister at the GM plant in Flint, Michigan, due to her inability to remember rightey-tightey, lefty-loosey."This new law should be real good for people like me," Gertz added. With the passage of this bill,Gertz and millions of other untalented citizens will finally see a light at the end of the tunnel.

Said Senator Dick Durbin (D-IL), "As a Senator with no abilities, I believe the same privileges that elected officials enjoy ought to be extended to every American with no abilities. It is our duty as lawmakers to provide each and every American citizen, regardless of his or her inadequacy, with some sort of space to take up in this great Nation."

Health care reform isn't serious until the patient is at the center of the picture.

Nick Gillespie | September 10, 2009

As someone under 60 with what passes for private health insurance and, far more important, access to actual health care (insurance and care are two very different things that are routinely and wrongly conflated in discussions of "reform"), I realize that I wasn't the primary audience of President Barack Obama's speech last night. In this, I am more representative than you might think. About 80 percent of people under 65 (who are covered by Medicare) have coverage and upwards of 80 percent of people with health care rate their service very favorably.

Yet as the father of two young kids whose backs are already bowing under the weight of the debt and future taxes our nation has wracked up in the past couple of decades, I'm more than a little concerned. Especially when Obama's speech failed to clarify even the most basic points for which he seemed to be reaching. Those of us who have coverage through existing private and public plans, he explained, can sit tight. Nothing will change. All uninsured people will be forced to get coverage, but precisely what that means is vague, to say the least (especially since half of them could either afford coverage now or qualify for existing programs). Then there's his claim that a plan which will cost almost $1 trillion dollars over the next 10 years will not only not cost us anything but will actually save us money in the long haul. No government official—and certainly not a president who came into office vowing to veto pork-barrel spending and implement a net spending cut and then did the exact opposite—has credibility on that score.

On a more basic level: Is the so-called public option in or out? Without saying it has to absolutely, definitely be part of any reform, Obama likened the mythopoetical public option to public universities that compete with private universities to increase choice for consumers. Leaving aside a host of questions about the analogy, college costs are among the few that have been rising with the speed and intensity of medical costs. So how would this sort of competition reduce costs, one of the main goals, says Obama, of any health care reform worth the name? Indeed, the obvious similarity between higher ed and health care is that both systems rely on a third-party payer system where expenses are heavily subsidized (by employers, tax breaks, parents, federal grants, special loans, you name it) and the end consumers (patients, students) are shielded from knowing the full cost of the services they consume.

And when we look at rising costs, what's to be done with Medicare, which Obama singled out for inviolable preservation (it's "a sacred trust" to him) yet denounced as spendthrift? Following a report by his own economic advisers that said around 30 percent of Medicare spending could be cut without any reduction in quality of service, Obama says we need to squeeze existing government programs for savings that will largely pay for the reforms, which include measures such as capping out of pocket costs and mandatory coverage of routine diagnostic tests such as mammograms that will certainly increase consumption of health care. It's a no-brainer to squeeze a program that wastes 30 percent of its budget, but it begs the question of why it has never been done. Not since Obama took office, and not since Bush expanded Medicare spending by hundreds of billions of dollars on prescription drugs (a plan whose price tag more than doubled in less than five years), and not since LBJ's actuaries underestimated the future cost of Medicare in 1990 by roughly 644 percent.

Obama proudly proclaimed that his plan would "cost around $900 billion over the next ten years" but that it would "not add to our deficit." This is simply not credible and, as my colleague Matt Welch points out with regularity, is exactly what Obama has promised regarding his overall spending plans, which most certainly have added to our deficits for as long as we dare look into the future.

One of the great problems with health care reform is that it always takes place, perhaps necessarily, either at the most grandiose level of abstraction ("Now," thundered Obama, "is the time to deliver on health care," as if it's an easily defined commodity) or the least insightful level of anecdote ("One man from Illinois," intoned the president, "lost his coverage in the middle of chemotherapy because his insurer found that he hadn't reported gallstones that he didn't even know about").

Here's a more basic question when it comes to controlling costs: The easiest way to do this is to make the person doing the buying actually pay the price. You haggle more when the change is coming out of your own pocket. Or, alternatively, you splurge because you're worth it. Earlier this year, my coverage changed from a conventional network preferred-provider plan with a standard co-pay for prescription drugs to a high-dollar deductible plan in which I essentially pay the first $2,000 dollars of medical care I consume in a year (any unused money rolls over in a Medical Savings Account that I can use in the following year). As my doctor prescribed me a brand-name drug, I thought about the cost and whether there were any possible alternatives. For the first time I can recall, I actually had a conversation with my doctor—right there, in the examination room—about medical costs. We settled on a generic alternative, saving me roughly $75 on that particular transaction. More recently, we had a similar conversation, in which he didn't know the costs of a name-brand drug and a generic alternative—a sign that the medical system has a long way to go in terms of customer service. Imagine going into an auto shop and the mechanic not being able to quote you the price difference between a new and refurbished part.

Yet exchanges such as the ones above are small examples of price signals being injected into a system that has consciously erected a series of mufflers, walls, and funhouse mirrors precisely to make it impossible for consumers to even know what they are paying, much less how to evaluate alternative plans of action. The blame here is shared by government policymakers, insurance bureaucrats, and medical providers, all of whom have some stake in a status quo that serves them tolerably well. Any reform that doesn't explicitly and transparently harness the same basic market forces that have driven down prices and improved quality throughout the economy over the past several decades simply will not work at containing costs and thus, expanding access (cheaper, better goods and services, whether we're talking about automobiles or plane tickets or gourmet coffee, have a way of leaching out into every level of society).

Doctors and other health professionals, who assiduously work to limit the number of health care providers in a given field, bitch and moan all the time about how Medicare, Medicaid, and private insurers are driving down reimbursements for basic procedures. Yet somehow the overall cost of health care goes up, up, up. It's because the system, including the vague reforms being championed by Barack Obama in a speech designed to lay out his plan in detail, really don't do anything to empower the person at the center of the drama—the patient, the customer—with the sort of choices that might actually trigger changes that will either curtail costs or, same thing, improve the range and quality of services so that we are happy with the money we're shoveling out.

Until that discussion gets underway, any so-called reform will fail to deliver on anything other than empty promises.

U.S. Is Finding Its Role in Business Hard to Unwind Pravda NY is surprised to discover that putting the toothpaste back in the tube is tough to do , , ,

ND L. ANDREWS and DAVID E. SANGERPublished: September 13, 2009 WASHINGTON — When President Obama travels to Wall Street on Monday to speak from Federal Hall, where the founders once argued bitterly over how much the government should control the national economy, he is likely to cast himself as a “reluctant shareholder” in America’s biggest industries and financial institutions.

But one year after the collapse of Lehman Brothers set off a series of federal interventions, the government is the nation’s biggest lender, insurer, automaker and guarantor against risk for investors large and small.

Between financial rescue missions and the economic stimulus program, government spending accounts for a bigger share of the nation’s economy — 26 percent — than at any time since World War II. The government is financing 9 out of 10 new mortgages in the United States. If you buy a car from General Motors, you are buying from a company that is 60 percent owned by the government.

If you take out a car loan or run up your credit card, the chances are good that the government is financing both your debt and that of your bank.

And if you buy life insurance from the American International Group, you will be buying from a company that is almost 80 percent federally owned.

Mr. Obama plans to argue, his aides say, that these government intrusions will be temporary. At the same time, however, he will push hard for an increased government role in overseeing the financial system to prevent a repeat of the excesses that caused the crisis.

“These were extraordinary provisions of support, not part of a permanent program,” said Lawrence H. Summers, director of the National Economic Council at the White House. “You’re seeing a process of exit every day. It’s a process that’s going to take quite some time, but the prospects are much brighter today than they were nine months ago.”

That process unfolds every day in a bland bureaucrat’s haven, an annex connected by an underground tunnel to the Treasury’s main building on Pennsylvania Avenue. There, about 200 civil servants — accountants, lawyers, former investment bankers — oversee the $700 billion program that pumps taxpayer money into banks, insurance companies and two of Detroit’s Big Three auto companies.

In the main Treasury building, senior officials hold veto power over executive pay packages for the biggest recipients of government loans, like Citigroup and Bank of America. A separate group, working closely with the Federal Reserve Bank of New York, oversees the multibillion-dollar bailout of American International Group. Ten blocks away, at the Federal Reserve, officials are still providing the emergency liquidity that keeps a battered economy moving.

To Mr. Obama’s critics, thousands of whom took to the streets of Washington this weekend to protest a new era of big government, all these efforts are part of a plan to dismantle free-market capitalism. On the ground it looks quite different, as a new president and his team try to define the proper role, both as owners and regulators.

A Light Hand on the Reins

Far from eagerly micromanaging the companies the government owns, Mr. Obama and his economic team have often labored mightily to avoid exercising control even when government money was the only thing keeping some companies afloat.

A few weeks ago, there were anguished grimaces inside the Treasury Department as the new chief executive of A.I.G., Robert H. Benmosche, whose roughly $9 million pay package is 22 times greater than Mr. Obama’s, ridiculed officials in Washington — his majority shareholders — as “crazies.”

Causing even more unease to policymakers, Mr. Benmosche insisted that A.I.G. — one of the worst offenders in the risk-taking that sent the nation over the edge last year — would not rush to sell its businesses at fire-sale prices, despite pressure from Fed and Treasury officials, who are desperate to have the insurer repay its $180 billion government bailout.

But in the end, according to one senior official, “no one called him and told him to shut up,” and no one has pulled rank and told him to sell assets as soon as possible to repay the loans.

A similar hands-off decision was made about the auto companies. Shortly after General Motors and Chrysler emerged from bankruptcy, some members of the administration’s auto task force argued that the group should not go out of business until it was confident that a new management team in Detroit had a handle on what needed to be done.

“The argument was that if the president said he wasn’t elected to run G.M., then we couldn’t hire a new board and then try to run any aspect of it,” one participant in the discussions said. The auto task force took off for summer vacation in July, and it never returned.

But it will probably be several years before the government can begin to sell its stake in G.M. back to the public, and even then, according a report issued last week by the independent monitor of the Troubled Asset Relief Program, some of the $20 billion or so funneled to G.M. and Chrysler is probably gone forever.

Winding Down Programs

By contrast, Mr. Obama’s team and the Federal Reserve have been more successful than generally recognized at winding down many of the support programs for banks. Nearly three dozen financial institutions have repaid $70 billion in loans to the Treasury, and officials predict that $50 billion more will be repaid over the next 18 months. Indeed, the government has earned tidy profit on the first round of repayments.

One of the biggest backstops has been the Temporary Liquidity Guarantee Program of the Federal Deposit Insurance Corporation, which now guarantees about $300 billion worth of bonds issued by banks.

==========

U.S. Is Finding Its Role in Business Hard to Unwind

Published: September 13, 2009 (Page 2 of 2)

The volume of new guarantees has declined to less than $5 billion a month in August from more than $90 billion a month earlier this year. The F.D.I.C. announced last week that it would either end the program entirely on Oct. 31 or reduce it further by substantially increasing the fees that banks have to pay.

Similarly, one of the Fed’s biggest emergency loan programs, the Term Auction Facility, has shrunk by more than half in the last 12 months. A second big program, which finances short-term i.o.u.’s for businesses, has shrunk to $124 billion, from $332 billion a year ago.

Obama administration officials bristle at even the hint that their rescue measures have ushered in a new era of “big government.”

But supporters and critics alike worry that it will be difficult to shrink the government to anything like its former role. For one thing, Mr. Obama is determined to expand government regulation of business and to beef up federal protections for consumers.

Seeking More Oversight

Mr. Obama’s proposals to overhaul the system of financial regulation would give the Fed new powers to supervise giant financial institutions whose failure could threaten the entire financial system.

To limit the dangers posed by insolvent institutions that are “too big to fail,” the F.D.I.C. would receive new authority to close them in an orderly way.

The administration would impose much tougher regulation over the vast market for financial derivatives like credit-default swaps and other exotic instruments for hedging risk.

It would also create an entirely new Consumer Financial Protection Agency, which would have broad power to regulate most forms of consumer lending.

In his speech on Monday, White House officials say, Mr. Obama will step up pressure on Wall Street to accept tougher oversight. Even though his proposals have made little headway in Congress, largely because of the battle over health care, Democratic lawmakers said they were determined to pass comprehensive legislation by next year.

“Big government now is the consequence of too little government before,” said Representative Barney Frank, chairman of the House Financial Services Committee. “What you have right now, with the government owning companies, is the result of insufficient regulation before.”

On a practical level, experts say it will take years for the government to unwind some of its rescue programs.

Thanks to the mortgage crisis and the collapse in housing prices, private investors have fled the mortgage market, and the federal government now finances about 9 out of 10 new home loans in the United States.

The Treasury took over Fannie Mae and Freddie Mac, the government-sponsored finance companies that own or have guaranteed more than $5 trillion in mortgages, in the first week of September 2008. Fannie and Freddie now buy or guarantee almost two-thirds of all new mortgages. The Federal Housing Administration guarantees another 25 percent.

The cost of keeping the two giant companies afloat has been huge. The Treasury has provided Fannie and Freddie with $95 billion to cover losses tied to soaring default rates and losses in value on their own mortgage portfolios. Analysts predict that the companies will need considerably more in the year ahead. At the same time, the Fed is buying almost all the new mortgage-backed securities issued by Fannie Mae, Freddie Mac and the F.H.A. Buying up those securities drives up their price and pushes down their effective interest rates, and ultimately lowers borrowing costs to homebuyers.

An Enormous Scale

The scale of the Fed’s intervention has been staggering. The central bank has acquired more than $700 billion in mortgage-backed securities so far, and officials have said they will buy up to $1.25 trillion — a goal that should take the Fed until early next year. To help Fannie and Freddie raise the money they need to buy mortgages from lenders, the Fed is also buying $200 billion of their bonds.

All told, the government is propping up almost the entire mortgage market and, by extension, the housing industry.

As the government backs away from its rescue operations, economists and others worry about unknown consequences. Some analysts are already predicting that mortgage rates will bump higher when the Fed stops buying mortgage securities, potentially delaying a recovery in housing.

But the much bigger puzzle is how the government will untangle Fannie Mae and Freddie Mac, with their combustible mix of taxpayer support, public policy goals and for-profit structures.

“It will be very difficult to unwind, having stepped in as big as they did,” said Howard Glaser, a senior housing official during the Clinton administration and now an industry consultant in Washington. “There is no structure, no mechanism, for private investors to come back into the market.”

Other experts and policy makers have begun to raise broader concerns. Even if the Obama administration and the Fed do manage to shrink the government’s role to precrisis levels, has the government’s immense rescue simply set the stage for more frequent interventions in the future?

“This crisis, whether it’s because of the Fed or the Treasury or Congress, has created a lot of new moral hazards,” said Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia. “Once you have done this once, even though it was in a severe crisis, the temptation will be for people to figure that in the next crisis you’ll do it again. You’ve got to figure out a way to say no.”

It’s worse than that. Ignore all the gas crap and just look at how the stupid car buyer got taken to the cleaners:

If you traded in a clunker worth $3500, you get $4500 off for an apparent "savings" of $1000.

However, you have to pay taxes on the $4500 come April 15th (something that no auto dealer will tell you). If you are in the 30% tax bracket, you will pay $1350 on that $4500.

So, rather than save $1000, you actually pay an extra $350 to the feds. In addition, you traded in a car that was most likely paid for. Now you have 4 or 5 years of payments on a car that you did not need, that was costing you less to run than the payments that you will now be making.

But wait, it gets even better: you also got ripped off by the dealer. For example, every dealer here in LA was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc for $12,500 the month before the "cash for clunkers" program started.

When "cash for clunkers" came along, they stopped discounting them and instead sold them at the list price of $15,500. So, you paid $3000 more than you would have the month before. (Honda, Toyota, and Kia played the same list price game that Ford and Chevy did).

So lets do the final tally here:

You traded in a car worth: $3500 You got a discount of: $4500 --------- Net so far +$1000 But you have to pay: $1350 in taxes on the $4500 -------- Net so far: -$350 And you paid: $3000 more than the car was selling for the month before ---------- Net -$3350

We could also add in the additional taxes (sales tax, state tax, etc.) on the extra $3000 that you paid for the car, along with the 5 years of interest on the car loan but lets just stop here.

So who actually made out on the deal? The feds collected taxes on the car along with taxes on the $4500 they "gave" you. The car dealers made an extra $3000 or more on every car they sold along with the kickbacks from the manufacturers and the loan companies. The manufacturers got to dump lots of cars they could not give away the month before. And the poor stupid consumer got saddled with even more debt that they cannot afford.

Obama and his band of merry men convinced Joe consumer that he was getting $4500 in "free" money from the "government" when in fact Joe was giving away his $3500 car and paying an additional $3350 for the privilege

President Obama's economic advisers are struggling to sell their financial reform plan to . . . an Obama economic adviser. Paul Volcker, the Democrat and former Federal Reserve chairman who worked with President Reagan to slay inflation in the 1980s, now leads President Obama's Economic Recovery Advisory Board. He warned in Congressional testimony Thursday that the pending Treasury plan could lead to more taxpayer bailouts by designating even nonbanks as "systemically important."

"The clear implication of such designation whether officially acknowledged or not will be that such institutions . . . will be sheltered by access to a federal safety net in time of crisis; they will be broadly understood to be 'too big to fail,'" Mr. Volcker told Congress.

Rather than creating broad bailout expectations destined to be expensively fulfilled, the former Fed chairman wants Washington to draw a tighter circle around commercial banks with insured deposits. Those inside the circle get heavy oversight and are eligible for assistance during a crisis. Assumptions that various other firms also enjoy the federal safety net "should be discouraged," said Mr. Volcker.

We don't agree with all of Mr. Volcker's prescriptions—nor he with ours—but on too big to fail he's exactly right. As he also told Congress, regulators are unlikely to correctly guess which firms will pose systemic risk, and the implicit protection by taxpayers could put firms not deemed important by Washington at a market disadvantage. He also pointed out that, while Team Obama pushes its plan to address firms that are "systemically important," Treasury still hasn't said what exactly that means.

Mr. Volcker's comments won't endear him to Administration officials due to receive more power under the Treasury plan, but taxpayers should be cheering his counsel.

WASHINGTON — The inspector general who oversees the government’s bailout of the banking system is criticizing the Treasury Department for some misleading public statements last fall and raising the possibility that it had unfairly disbursed money to the biggest banks.

A Treasury official made incorrect statements about the health of the nation’s biggest banks even as the government was doling out billions of dollars in aid, according to a report on the Troubled Asset Relief Program to be released on Monday by the special inspector general, Neil M. Barofksy.

The report also provides new insight into the way the Treasury allocated billions of dollars to nine of Wall Street’s largest players. The report says that Bank of America appeared to qualify for more aid earlier, under the government plan. That assertion adds another element of intrigue to continuing investigations of the bank’s merger with Merrill Lynch and the role that regulators played in the deal, even as Merrill’s condition deteriorated.

The bailout formula called for banks to get an amount equal to as much as 3 percent of their risk-weighted assets, with aid capped at $25 billion for each institution, according to the report. By size, Citigroup, JPMorgan Chase and Bank of America could have qualified for more, and the first two received $25 billion.

But Bank of America was given only $15 billion in October, since Merrill Lynch was earmarked for $10 billion. The two companies agreed to a merger, though their deal had not yet been approved by regulators or shareholders.

Bank of America ultimately received Merrill’s $10 billion in January — as well as $20 billion in additional bailout funds — but if the bank had not been involved in the Merrill deal, it would probably have received $25 billion at the outset, as did Citigroup and JPMorgan.

Another company in the process of a merger was not treated the same. Wells Fargo was acquiring Wachovia, and it received both companies’ money at the start, according to the inspector general.

Mr. Barofsky’s office also says that regulators were wrong to tell the public last year that the earliest bailout recipients were all healthy.

Former Treasury Secretary Henry M. Paulson Jr., for instance, said on Oct. 14 that the banks were “healthy,” and that they accepted the money for “the good of the U.S. economy.” The banks, he said, would be better able to increase their lending to consumers and businesses.

In truth, regulators were concerned about the health of several banks that received that first bailout, the inspector general writes.

The inspector general said government officials need to be more careful when describing their actions and rationale. In a letter included with the report, the Federal Reserve concurred with Mr. Barofsky’s concern about the statements made last year, but the Treasury Department said that any review of announcements last year “must be considered in light of the unprecedented circumstances in which they were made.”

Elizabeth Warren: We Must Open Our Wallets To All Deadbeats Everywhere Always

Tim Cavanaugh | October 9, 2009

What does it say about Washington, DC's professional class when out of five people overseeing a $700 billion Treasury Department program, only two of them show any concern for American taxpayers, and one of those two is a member of Congress?

The Congressional Oversight Panel (COP) for the Troubled Asset Relief Program has put out a 210-page report [pdf] on foreclosure mitigation efforts. The amount of special pleading in this report shocks the conscience. COP has an interesting story to tell: that Treasury's decision to commit $50 billion in TARP funds to the Home Affordable Modification Program (HAMP) is a fiasco. But instead of sticking to that truth, COP repeatedly uses the program's failures as propaganda for expanding the program.

We're told, for example, that "the foreclosure crisis has moved beyond subprime mortgages and into the prime mortgage market" and that a crisis once limited to "home flippers, speculators, reach borrowers...and homeowners who were sold subprime refinancings" has now engulfed "families who put down 10 or 20 percent and took out conventional, conforming fixed-rate mortgages to purchase or refinance homes that in normal market conditions would be within their means."

First of all, this is overblown. The most recent OCC Mortgage Metrics Report has prime mortgage default rates at 3 percent -- double the usual average, but unalarming. Rather than bringing in outside reports, though, let's be sporting and find the inconsistencies within COP's own report. On page 30, we learn that "as many as 50 percent of at-risk mortgages also have second liens. Therefore, it is critical that second liens be addressed as part of a comprehensive mortgage modification initiative."

Those second liens, boy, they're like secondhand smoke and gay sex. You're just sitting there minding your own business when some goon comes along, hands you a barrel of money, and then expects you to pay it back. My heart goes out to all those families with fixed-rate confirming loans who put down a large equity portion and yet mysteriously are getting stuck by a greedy second lien holder. And the pixies, the sprites, the leprechauns and the centaurs -- my heart goes out to all of them too.

What makes the report interesting is that it's not the work of conscious idealogues but of earnest good-government believers. In a way, picking out the chop logic and weird passive phrasings (duly aped by the media in, for example, this A.P. piece that says foreclosures are "stalking" innocent home borrowers) is too easy. This is just what happens when smart, honest people try to tell dumb lies. Characteristically, the report brushes past what should be an "oversight" committee's main concern: that Treasury's accounting of TARP expenditures is laughably thin and incomplete.

In fact, it's because Chairwoman Elizabeth Warren (making the case for an improved and expanded program on the YouTubes here) and her cohorts believe they are acting in the nation's best interest that we need to remember something: This is not some nearly theoretical public choice exercise, where the distributed costs to taxpayers are balanced against the concentrated benefits to some group. To the (mercifully limited) extent a foreclosure modification program works, it imposes a very concentrated cost on a very large group: home buyers. There are millions upon millions of Americans out there who want to buy homes and would be able to do so if homes were affordable. If the Treasury Department wants to help out homeowners, it will let house prices lose whatever amount they still need to lose (I'm calling it 30 percent) to make home-buying an attractive proposition again. (And it's worth noting that the Secretary of the Treasury has a direct personal financial interest in supporting inflated home prices.)

And so I suggest you dispense with the main report and skip right down to page 138, where the dissents begin. Rep. Jeb Hensarling (R - TX)'s opinion makes the case against expanding foreclosure mitigation programs with great coherence and ample documentation.

Time for Congress to Work Under the Same Rules as the Private Sectorby James Sherk and Ryan O'DonnellBackgrounder #2326

Abstract: All too often, Congress imposes restrictive and burdensome regulations on employers in the private sec tor--while conveniently exempting itself from these same rules. Many Members of Congress are currently urging passage of the misnamed Employee Free Choice Act and RESPECT Act, which, again, would leave Congress untouched. This paper demonstrates the hypocrisy of such an approach, and urges Congress to either swallow its own medicine or to extend the same rights to the private sector that it claims for itself.

Many Members of the current Congress support passage of the misnamed Employee Free Choice Act (EFCA) and the RESPECT Act--laws that would push workers into joining unions. They argue that unions benefit workers and the economy. Yet Congress's own employees do not have the right to form a union-- making Congress exempt from the consequences of the very union laws it might pass. If Congress believes--as it claims--that unions do not exces sively burden private-sector employees and employ ers, Congress should allow its own staff to unionize under the National Labor Relations Act (NLRA). Con­gress should not exempt itself from the rules and reg ulations it imposes on businesses across the country.

Organized Labor Lobbies for More Power

Most non-union workers--81 percent, according to a recent Rasmussen poll--do not want to form unions at their workplaces.[1] Federal employment law and modern human resource policies, as well as the increasing focus on individual skills in the work place, have reduced the need for union representa tion. Consequently, private-sector union membership has fallen sharply over the past 25 years. Today, just 7.6 percent of private-sector workers belong to a union, down from 16.5 percent in 1983.[2]

Organized labor has responded by lobbying strongly for legislation that increases union power over employees and employers in order to make it easier to recruit new dues-paying members. The Employee Free Choice Act (EFCA) is anything but-- abolishing secret-ballot elections for union forma tion, making it hard for workers to turn down a union's offer to join. It also empowers government officials to dictate contracts to newly organized workers and firms in the private sector. The RESPECT Act similarly penalizes the workplace. By narrowly defining "supervisors" as employees who spend a majority of their time hiring or disciplining employees, the RESPECT Act would re-establish the strict and hierarchical labor-management divisions that characterized the workplace until the mid-20th century. Instead of allowing workers the freedom to decide whether to join a union, EFCA and the RESPECT Act would pressure workers to unionize.

Many Members of Congress support these bills. They argue that unions improve the workplace and that these proposals will not unduly hinder busi ness operations or curtail workers' rights. If this is true, Congress should live under the same law.

Congressional Staff Not Covered by Unionizing Statutes

Since the National Labor Relations Act applies only to the private sector, congressional employees are prohibited from forming unions. Section 2 .2 of the NLRA specifically excludes public-sector employers from the act's definition of "employer":

The term "employer" includes any person acting as an agent of an employer, directly or indirectly, but shall not include the United States or any wholly owned Govern ment corporation, or any Federal Reserve Bank, or any State or political subdivision thereof, or any person subject to the Railway Labor Act…

In order to enforce the Federal Service Labor-Management Relations statute, which allows fed eral employees to organize and bargain collec­tively, Congress created the Federal Labor Relations Authority (FLRA) in 1978.[3] However, because the Federal Service Labor-Management Relations statute excludes legislative employees, including those working in "the personal office of any Member of the House of Representatives or of any Senator," congressional employees remain unable to organize.

Should Congress Play by Its Own Rules?

Congress should not stack the deck by pushing workers into collective bargaining. The law should leave that choice to employees and should neither encourage nor discourage unionizing. If, however, Congress believes that unionizing best protects the rights of private-sector employees and does not harm business operations, Congress should allow its own staff to organize and bargain collectively under the same laws it wants to impose on private-sector workers. Although unionizing the Hill is hardly a desirable outcome, it is curious that Congress refuses to apply the laws it devises for the private sector to its own workplaces. Legislatively speaking, it would be fairly simple--Congress could simply include itself under the National Labor Relations Act's definition of an employer.

"Card Check" Impact on a Congressional Office

Many Members of Congress argue that replacing secret-ballot elections with publicly signed cards ("card check") and allowing government arbitrators to impose contracts on employees and employers will not excessively burden business operations. Again, if this is what Members of Congress truly believe, why do they not apply the provisions of EFCA to their own staff?

If Congress extended the NLRA to include itself, card check would also apply to congressional offices. If EFCA passed, congressional staff, too, would lose the privacy of the voting booth. Addi tionally, 100 days after a majority of staff in a con gressional office signed union cards and began bargaining for a contract their union could request mediation by the Federal Mediation and Concilia tion Service (FMCS). EFCA mandates that "the FMCS shall refer the dispute to an arbitration board established in accordance with such regulations as may be prescribed by the service."[4] In essence, under EFCA's arbitration clause, the government would be able to dictate key private-sector busi nesses decisions.

Many private-sector employers have argued against giving government bureaucrats this level of control over their businesses. They fear that unknowledgeable bureaucrats could impose con tracts that prove impossible to work with, and could bankrupt their firms. Congressional supporters of EFCA have simply dismissed these fears. Yet, if EFCA applied to Congress, government officials would determine how many people each Member of Congress hires, as well as their salaries, promotion procedures, and their retirement and health benefits.

Redefining Supervisors

Some Members of Congress have proposed elim inating the NLRA's definition of "supervisor" in the RESPECT Act.[5] Under the NLRA, unions are not allowed to accept company supervisors as members because they help manage the company. If the RESPECT Act became law, the only employees who would be considered supervisors would be those who spend a majority of their time hiring, transfer ring, suspending, laying off, recalling, promoting, discharging, rewarding, or disciplining other employees. Very few employees at any firm spend the majority of their time on these matters.[6]

If Congress applied the RESPECT Act to itself, chiefs of staff and legislative directors would become part of the collective bargaining unit. Very few of them spend a majority of their working time hiring, promoting, and laying off employees. As a result, most chiefs of staff and legislative directors would become members of the union bargaining unit. Consequently, automatic seniority promo tions--not decisions by Members of Congress-- would determine who served in these positions. Grievance procedures would make it next to impos sible to lay off ineffective legislative directors and chiefs of staff. This could reduce their effectiveness on the job. Yet, Congress wants to return private-sector supervisors to the bargaining unit, claiming no undue hardship will result.

Unions Ban Merit Wages

Giving congressional staffers the same rights to collectively bargain as private employees would also impose on Congress the same restrictions that the National Labor Relations Act (NLRA) imposes on private workers and their employers. In the non-unionized private sector, most workers are evaluated on the basis of merit, earning promo tions, raises, and bonuses according to their perfor mance. Congress also operates this way: 57 percent of congressional offices offer annual merit-based raises.[7] Like non-union private-sector employers, Members of Congress generally treat workers as individuals and reward individual exemplary per formance with higher pay. Employees can get ahead by working hard.

The NLRA makes earning raises very difficult for union members. Employers are not allowed to pay individual union members more than dictated by their contracts without negotiating with the union bosses--who rarely agree to merit raises. Most union contracts base salaries on seniority systems and job classifications.[8] As a result, no matter how produc tive an individual union member is, he cannot earn more than the amount specified in his union contract.

Union members chafe under this restriction because they, like anyone else, want the opportunity to get ahead. Employers want to use incentives that result in worker productivity that raises wages and profits. If Congress believes that preventing merit bonuses does not hinder productivity, it should not hesitate to allow its own workers to unionize and accept that consequence. If Congress believes that merit pay improves productivity, it should allow unionized private-sector employers to offer merit pay as well. The proposed Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act would lift the wage ceiling that unions impose on their members.[9]

Time for Congress to Live by Its Own Rules

Congress has developed two separate sets of labor polices: one for the private sector, another for itself. If Congress believes that expanding collective bargaining through legislation like the RESPECT Act and EFCA benefits workers and improves the workplace, it should have no difficulty living under these same laws and allowing its employees to organize under the National Labor Relations Act. The same restrictions Congress wants to impose on union and non-union private-sector employees-- the seniority wage ceiling, government-imposed contracts, eliminating the secret ballot during union organizing drives, and the loss of managerial status for supervisory employees--should also apply to Congress.

It is time for Congress to stop forcing private-sector employers to swallow a pill that Congress refuses to swallow itself.

James Sherk is Bradley Fellow in Labor Policy in the Center for Data Analysis, and Ryan O'Donnell, a former private-sector labor attorney, is a Web Editor, at The Heritage Foundation.

[1]Rasmussen Reports, "Only 9% of Non-Union Workers Want to Join a Union," March 16, 2009. Sample of 1,000 adults conducted March 13-14, 2009, with a margin of error of + or - 3 percent.

Cash for Clubbers Congress's fabulous golf cart stimulus.Article We thought cash for clunkers was the ultimate waste of taxpayer money, but as usual we were too optimistic. Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama's stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart.

The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart. Even in states that don't have their own tax rebate plans, the federal credit is generous enough to pay for half or even two-thirds of the average sticker price of a cart, which is typically in the range of $8,000 to $10,000. "The purchase of some models could be absolutely free," Roger Gaddis of Ada Electric Cars in Oklahoma said earlier this year. "Is that about the coolest thing you've ever heard?"

The golf-cart boom has followed an IRS ruling that golf carts qualify for the electric-car credit as long as they are also road worthy. These qualifying golf carts are essentially the same as normal golf carts save for adding some safety features, such as side and rearview mirrors and three-point seat belts. They typically can go 15 to 25 miles per hour.

In South Carolina, sales of these carts have been soaring as dealerships alert customers to Uncle Sam's giveaway. "The Golf Cart Man" in the Villages of Lady Lake, Florida is running a banner online ad that declares: "GET A FREE GOLF CART. Or make $2,000 doing absolutely nothing!"

Golf Cart Man is referring to his offer in which you can buy the cart for $8,000, get a $5,300 tax credit off your 2009 income tax, lease it back for $100 a month for 27 months, at which point Golf Cart Man will buy back the cart for $2,000. "This means you own a free Golf Cart or made $2,000 cash doing absolutely nothing!!!" You can't blame a guy for exploiting loopholes that Congress offers.

The IRS has also ruled that there's no limit to how many electric cars an individual can buy, so some enterprising profiteers are stocking up on multiple carts while the federal credit lasts, in order to resell them at a profit later. We should note that some states, such as Oklahoma, have caught on to the giveaway and are debating whether to cancel or limit their state credits. But in Congress they're still on the driving range.

This golf-cart fiasco perfectly illustrates tax policy in the age of Obama, when politicians dole out credits and loopholes for everything from plug-in cars to fuel efficient appliances, home insulation and vitamins. Democrats then insist that to pay for these absurdities they have no choice but to raise tax rates on other things—like work and investment—that aren't politically in vogue. If this keeps up, it'll soon make more sense to retire and play golf than work for living.

The home mortgage modification program espoused by President Obama and affectionately called HAMP is wreaking havoc on loss mitigation at banks. The most glaring example: Citigroup.

Citigroup officials have effectively acknowledged that an outsider cannot get a sense for the bank's mortgage performance because it has so many loan modifications in the works. Citi's 90-to-179-day delinquency bucket is growing in size because of all the loan mods underway, yet the bank said it does not know what the results of these modifications will be. Citi's CFO:

Under HAMP, borrowers make reduced mortgage payments for a trial period, during which they continue to age through our delinquency buckets even if they are current under the new payment terms. This serves to increase our delinquencies. Virtually all of the increase in the 90 to 179 bucket and half of the increase in the 180 plus day bucket are loans in HAMP trial modifications. The rest of the increase in the 180 plus day bucket is attributable to a backlog of foreclosure inventory driven by a slowdown in the foreclosure process in many states. ... The HAMP program right now has got a rather significant impact on our delinquency statistics and really makes it difficult for anyone from the outside to actually have a good view as to the inherent credit profile in our delinquency buckets.

Here's a look at the current state of Citi's mortgage portfolio:

The HAMP dynamic is repeating itself at banks nationwide. BB&T Corp., a Top 20 bank in the US, also said yesterday that loan modifications were skewing its credit-performance metrics.

The upshot of all this is that modifications -- as opposed to collections or foreclosure -- injects a big question mark into mortgage performance and returns. Even beyond the immediate loss allocations for holders of mortgages, subsequent buyers of mortgage paper that has been modified must confront the fact that even the post-charged-off performance of the loans may not perform as expected. HAMP has thrown a big question mark into the mortgage market, and I expect that the collection industry is going to have to figure it out -- eventually.

I had a former employee call me earlier today inquiring about a job, and at the end of the conversation he gave me his phone number. I asked the former employee if this was a new cell phone number and he told me yes this was his “Obama phone.” I asked him what an “Obama phone” was and he went on to say that welfare recipients are now eligible to receive (1) a FREE new phone and (2) approx 70 minutes of FREE minutes every month. I was a little skeptical so I Googled it and low and behold he was telling the truth. TAX PAYER MONEY IS BEING REDISTRIBUTED TO WELFARE RECIPIENTS FOR FREE CELL PHONES. This program was started earlier this year. Enough is enough, the ship is sinking and it’s sinking fast. The very foundations that this country was built on are being shaken. The age old concepts of God, family, and hard work have flown out the window and are being replaced with “Hope and Change” and “Change we can believe in.” You can click on the link below to read more about the “Obama phone”…

The program that supports this give away predates Obama by a over a decade. Take a look at the link. I just guess it took 15years before the cellphone component could finally be worked out. Somebody want to see whether Tracfone has investment potential. If somebody is making hay while the sun shines, it makes sense to jump on and ride the wagon back to the barn. Couldn't resist the Hayride metaphor with the fall season upon us.

John=========Tracfone is a subsidiary of American Movil AMX (NYSE) or AMOV (Nasdaq)..

The Troubled Asset Relief Program will expire on December 31, unless Treasury Secretary Timothy Geithner exercises his authority to extend it to next October. We hope he doesn't. Historians will debate TARP's role in ending the financial panic of 2008, but today there is little evidence that the government needs or can prudently manage what has evolved into a $700 billion all-purpose political bailout fund.

We supported TARP to deal with toxic bank assets and resolve failing banks as a resolution agency of the kind that worked with savings and loans in the 1980s. Some taxpayer money was needed beyond what the FDIC's shrinking insurance fund had available. But TARP quickly became a Treasury tool to save failing institutions without imposing discipline (Citigroup) and even to force public capital onto banks that didn't need it. This stigmatized all banks as taxpayer supplicants and is now evolving into an excuse for the Federal Reserve to micromanage compensation.

TARP was then redirected well beyond the financial system into $80 billion in "investments" for auto companies. These may never be repaid but served as a lever to abuse creditors and favor auto unions. TARP also bought preferred stock in struggling insurers Lincoln and Hartford, though insurance companies are not subject to bank runs and pose no "systemic risk." They erode slowly as customers stop renewing policies.

TARP also became another fund for Congress to pay off the already heavily subsidized housing industry by financing home mortgage modifications. Not one cent of the $50 billion in TARP funds earmarked to modify home mortgages will be returned to the Treasury, says the Congressional Budget Office.

As of the end of September, Mr. Geithner was sitting on $317 billion of uncommitted TARP funds, thanks in part to bank repayments. But this sum isn't the limit of his check-writing ability. Treasury considers TARP a "revolving fund." If taxpayers are ever paid back by AIG, GM, Chrysler, Citigroup and the rest, Treasury believes it has the authority to spend that returned money on new adventures in housing or other parts of the economy.

A TARP renewal by Mr. Geithner could thus put at risk the entire $700 billion. Rep. Jeb Hensarling (R., Texas) and former SEC Commissioner Paul Atkins sit on TARP's Congressional Oversight Panel. They warn that the entire taxpayer pot could be converted into subsidies. They are especially concerned about expanding the foreclosure prevention programs that have been failing by every measure.

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Associated Press

Treasury Secretary Timothy Geithner.TARP inspector general Neil Barofsky agrees that the mortgage modifications "will yield no direct return" and notes charitably that "full recovery is far from certain" on the money sent to AIG and Detroit. Mr. Barofsky also notes that since Washington runs huge deficits, and interest rates are almost sure to rise in coming years, TARP will be increasingly expensive as the government pays more to borrow.

Even with the banks, TARP has been a double-edged sword. While its capital injections saved some banks, its lack of transparency created uncertainty that arguably prolonged the panic. Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Hank Paulson recently admitted to Mr. Barofsky what everyone figured at the time of the first capital injections. Although they claimed in October 2008 they were providing capital only to healthy banks, Mr. Bernanke now says some of the firms were under stress. Mr. Paulson now admits that he thought one in particular was in danger of failing. By forcing all nine to take the money, they prevented the weaklings from being stigmatized.

Says Mr. Barofsky, "In addition to the basic transparency concern that this inconsistency raises, by stating expressly that the 'healthy' institutions would be able to increase overall lending, Treasury created unrealistic expectations about the institutions' conditions and their ability to increase lending."

The government also endangered one of the banks that they considered healthy at the time. In December, Mr. Paulson pressured Bank of America to complete its purchase of Merrill Lynch. His position is that a failed deal would have hurt both firms, but this is highly speculative. Mr. Barofsky reports that, according to Fed documents, the government viewed BofA as well-capitalized, but officials believed that its tangible common equity would fall to dangerously low levels if it had to absorb the sinking Merrill.

In other words, by insisting that BofA buy Merrill, Messrs. Paulson and Bernanke were spreading systemic risk by stuffing a failing institution into a relatively sound one. And they were stuffing an investment bank into one of the nation's largest institutions whose deposits were guaranteed by taxpayers. BofA would later need billions of dollars more in TARP cash to survive that forced merger, and when that news became public it helped to extend the overall financial panic.

Treasury and the Fed would prefer to keep TARP as insurance in case the recovery falters and the banking system hits the skids again. But the more transparent way to address this risk is by buttressing the FDIC fund that insures bank deposits and resolves failing banks. The political class has twisted TARP into a fund to finance its pet programs and constituents, and the faster it fades away, the better for taxpayers and the financial system.

It's hard not to laugh when viewing the results of the federal first-time home-buyer tax credit. The credit, worth up to $8,000 for the purchase of a home, has only been available since April of last year. Yet news of the latest taxpayer-funded mortgage scam has traveled fast. The Treasury's inspector general for tax administration, J. Russell George, recently told Congress that at least 19,000 filers hadn't purchased a home when they claimed the credit. For another 74,000 filers, claiming a total of $500 million in credits, evidence suggests that they weren't first-time buyers.

Among those claiming bogus credits, at least some of them were definitely first-timers. The credit has already been claimed by 500 people under the age of 18, including a four-year-old. This pre-K housing whiz likely bought because mom and dad make too much to qualify for the full credit, which starts to phase out at $150,000 of income for couples, $75,000 for singles.

As a "refundable" tax credit, it guarantees the claimants will get cash back even if they paid no taxes. A lack of documentation requirements also makes this program a slow pitch in the middle of the strike zone for scammers. The Internal Revenue Service and the Justice Department are pursuing more than 100 criminal investigations related to the credit, and the IRS is reportedly trying to audit almost everyone who claims it this year.

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Associated Press .Speaking of the IRS, apparently its own staff couldn't help but notice this opportunity to snag an easy $8,000. One day after explaining to Congress how many "home-buyers" were climbing aboard this gravy train, Mr. George appeared on Neil Cavuto's program on the Fox Business Network. Mr. George said his staff has found at least 53 cases of IRS employees filing "illegal or inappropriate" claims for the credit. "In all honesty this is an interim report. I expect that the number would be much larger than that number," he said.

The program is set to expire at the end of November, so naturally given its record of abuse, Congress is preparing to extend it. Republican Senator Johnny Isakson of Georgia is so pleased with the results that he wants to expand the program beyond first-time buyers and double the income limits.

This is the point in the story when a taxpayer's sense of humor is bound to give way to a different emotion. The credit's cost is running at about $1 billion a month and $15 billion for the year. Also, even when employed by an honest buyer, it's another distortion that drives capital into housing and away from other more productive uses. For America's tens of millions of tax-paying renters, it's another subsidy they provide for their neighbors to be able to sell their houses at a higher price.

While the credit seems to have boosted home sales, many of those sales would have happened anyway and have merely been stolen from the future. Meanwhile, the credit continues to distort the housing market and postpone the day when home prices can find a floor that is a basis for a stable recovery.

More than two years into the housing bust, trillions of dollars in taxpayer losses or guarantees via Fannie Mae and Freddie Mac, and amid an ongoing plague of redefaults in federal programs to prevent foreclosures, politicians are still trying to manipulate housing prices. And leave it to Congress to design a program that even a four-year-old can scam.

My apologies to the board, but I can't find a nicer way of saying this, but what a bunch of brain-dead, Marxist dumb-f*cks we have in power and unfortunately that reaches most of the way across to both parties.

What went wrong with housing in the first place? A bubble in values grew and grew far beyond the intrinsic value of the properties and far beyond the ability of buyers to continue to afford them. How could or why would something sell above its 'value'?? One word: Market Tampering (okay, two words).

Besides government skewing of values in the form of deductibility of interest that constitutes mostly a luxury item, besides the allowance of deductibility of property taxes, which takes away from the electorate pressure to LOWER the property taxes, we invent all these other non-market concoctions to skew the values. Or we are just brain dead to the idea of UNINTENDED CONSEQUENCES. Worst was the CRA P rogram that pressured banks to make non-creditworthy loans. Next came the disguising and packaging of bad loans by federally insured institutions without oversight. Then put on top of that FREE MONEY in the form of the first time homebuyer federal credit to further encourage people to buys homes they can't afford and to END the practice of SAVING and putting some of their OWN hard-earned money on the line before the bank puts up the rest.

Elinor Ostrom's research shows that free people can overcome the "tragedy of the commons"

John Stossel | October 29, 2009

Much of what government does is based on the premise that people can't do things for themselves. So government must do it for them. More often than not, the result is a ham-handed, bumbling, one-size-fits-all approach that leaves the intended beneficiaries worse off. Of course, this resulting failure is never blamed on the political approach—on the contrary, failure is taken to mean the government solution was not extravagant enough.

We who have confidence in what free people can achieve have long believed that government should not venture beyond its narrow sphere of providing physical security. It should not attempt to cure every social ill. So it's good to learn that serious scholars have demonstrated that our intuitions are right. Free people, given the chance, solve what many "experts" think are problems that require state intervention.

For that reason, Elinor Ostrom's winning of the Nobel Memorial Prize in Economic Sciences ought to kindle a new interest in freedom. (See my earlier column here.)

Ostrom made her mark through field studies that show people solving one of the more vexing problems: efficient management of a common-pool resource (CPR), such as a pasture or fishery. With an unowned "commons," each individual has an incentive to get the most out of it without putting anything back.

If I take fish from a common fishing area, I benefit completely from those fish. But if I make an investment to increase the future number of fish, others benefit, too. So why should I risk making the investment? I'll wait for others to do it. But everyone else faces the same free-rider incentive. So we end up with a depleted resource and what Garrett Harden called "the tragedy of the commons."

Except, says Ostrom, we often don't. There is also an "opportunity of the commons." While most politicians conclude that, depending on the resource, efficient management requires either privatization or government ownership, Ostrom finds examples of a third way: "self-organizing forms of collective action," as she put it in an interview a few years ago. Her message is to be wary of government promises.

"Field studies in all parts of the world have found that local groups of resource users, sometimes by themselves and sometimes with the assistance of external actors, have created a wide diversity of institutional arrangements for cooperating with common-pool resources."

She has studied, for example, self-governing irrigation systems in Nepal and found successes never anticipated in the textbooks. "Irrigation systems built and governed by the farmers themselves are on average in better repair, deliver more water, and have higher agricultural productivity than those provided and managed by a government agency. ... (F)armers craft their own rules, which frequently offset the perverse incentives they face in their particular physical and cultural settings. These rules may be almost invisible to outsiders. ..."

In Governing the Commons, she writes about self-governed commons in Switzerland, Japan, the Philippines, and elsewhere that date back hundreds of years. For example, in the alpine village of Tobel, Switzerland, herdsmen "tend village cattle on communally owned alpine meadows" under rules of an association created in 1483. The rules govern who has access to the grazing lands and how many cows a herdsman can place there, preventing overgrazing. The cattle owners themselves run the association and handle the monitoring. Sanctions are imposed for violation of the rules, but compliance is high.

Don't mistake the association for government. Rather, it is a private co-op designed for a narrow purpose. "All of the Swiss institutions used to govern commonly owned alpine meadows have one obvious similarity—the appropriators themselves make all the major decisions about the use of the CPR."

She found something similar in Japanese villages, where residents use private property for some agricultural purposes and self-managed common forests for others.

Solutions imposed by external authority were not necessary—and usually self-defeating: "Academics, aid donors, international nongovernmental organizations, central governments, and local citizens need to learn and relearn that no government can develop the full array of knowledge, institutions and social capital needed to govern development efficiently and sustainably. ..."

How about that? Freedom works.

John Stossel will soon host Stossel on the Fox Business Network. He's the author of Give Me a Break and of Myth, Lies, and Downright Stupidity.

Snowmaking in Duluth, and I wonder if you have to melt down your Lexus to get the golf cart credit (you don't). My personal favorite has got to be no. 3. $219k to study the sex lives of female college freshmen. I know people who would do that thankless work for nothing - for the good of the country.

Where in the C (Constitution) is the federal authority to build baseball training parks in 2 cities, to neuter in Wichita, to make snow in Duluth, to see if the girls are getting any? Seriously, this stuff isn't funny.

Mapping Rabbit Feces, Studying Facebook, And Building MLB Spring Training Facilities Are All Financed By The American Taxpayer

1. $300,000 FOR MAPPING RADIOACTIVE RABBIT FECES: “A Week Mapping Radioactive Rabbit Feces With Detectors Mounted On A Helicopter Flying 50 Feet Over The Desert Scrub. … $300,000 In Federal Stimulus Money.” “A government contractor at Hanford, in south-central Washington State, just spent a week mapping radioactive rabbit feces with detectors mounted on a helicopter flying 50 feet over the desert scrub. … the helicopter flights, which covered 13.7 square miles and were paid for with $300,000 in federal stimulus money, took place in an area that had never been used by the bomb makers. … Marylia Kelley, the executive director of a California group called Tri-Valley Communities Against a Radioactive Environment, said the rabbit cleanup was ‘kind of funny, in a sick way.’” (“Even Rabbit Droppings Count In Nuclear Cleanup,” The New York Times, 10/14/09)

2. $4,200-$5,500 TAX CREDIT FOR PURCHASING GOLF CARTS: “President Obama’s Stimulus Plan… Is Now Paying Americans To Buy That Great Necessity Of Modern Life, The Golf Cart.” “Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama's stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart. The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart.” (“Cash For Clubbers,” The Wall Street Journal, 10/17/09)

3. $219,000 TO STUDY THE SEX LIVES OF FEMALE COLLEGE FRESHMEN: “Five Hundred Syracuse University Freshmen Will Divulge The Details Of Their Sex Lives … $219,000 In Stimulus Funds For The Study.” “Five hundred Syracuse University freshmen will divulge the details of their sex lives as part of a women's health study called ‘The Women's Health Project,’ being conducted by Michael Carey, SU professor of psychology and medicine. Carey has found himself the target of nationwide criticism from conservatives since he received $219,000 in stimulus funds for the study, which looks at the sex patterns of college women.” (“SU Sex Study Raises Concern,” The [Syracuse] Daily Orange, 9/8/09)

4. $1 MILLION TO RENOVATE “THE SUNSET STRIP”: “Sunset Boulevard, Also Known As ‘The Sunset Strip’ And One Of The Most Famous Streets In The World, Will Be Getting A $7 Million Facelift After More Than 75 Years Of Use, With A Free Million Dollar Nose Job Coming From Uncle Sam. The City of West Hollywood Council received one million dollars in federal funds from the Federal American Reinvestment and Recovery Act (ARRA), (otherwise known as the $700 billion federal stimulus package), for the long-planned Sunset Strip Beautification Project, which is scheduled to break ground soon. The guaranteed funding will allow the City to increase the already nearly $7 million budgeted for this project by an additional $1,105,000, meaning enhancements to a project that already included the resurfacing of the roadway, sidewalk and improved landscaping.” (“Feds Stimulus Sunset Strip Beautification Project,” WeHoNews, 9/28/09)

5. $2.3 MILLION FOR BUG RESEARCH IN CONNECTICUT: “$2.3 Million” “Federal Economic Stimulus Cash” For “Rearing Large Numbers Of Arthropods” Such As “Nasty Invasive Insects Like The Asian Longhorned Beetle, The Nun Moth, And The Infamous ‘Predator Of The Hemlock,’ The Woolly Adelgid.” “‘Rearing large numbers of arthropods’ probably isn't the first thing that comes to mind when you think about using Connecticut's $3 billion in federal economic stimulus cash. But the U.S. Forest Service is using part of the $2.3 million it's spending here to fix up a quarantine research facility in Ansonia. (The arthropods, by the way, are nasty invasive insects like the Asian longhorned beetle, the nun moth, and the infamous ‘predator of the hemlock,’ the woolly adelgid.)” (“Money For Nothing,” New Haven Advocate, 9/1/09)

6. $6 MILLION FOR A SNOWMAKING FACILITY IN THE 15th SNOWIEST CITY IN THE COUNTRY: “The Other Third Of The Stimulus, Government Infrastructure Spending, Has Been The Most Controversial From The Start. Some Proposals Have Been Criticized As Wasteful, Such As A $6 Million Snowmaking Facility In Duluth, Minn.” (“The Challenge In Counting Stimulus Returns,” The Wall Street Journal, 10/27/09) (Top 101 Cities With The Highest Average Snowfall In A Year (Population 50,000+))

7. $500,000 TO STUDY “SOCIAL NETWORKS LIKE FACEBOOK”: “A $498,000, Three-Year Grant” To Study “Social Networks Like Facebook.” “Millions of Internet users have been enjoying the fun -- and free -- services provided by advertiser-supported online social networks like Facebook. But Landon Cox, a Duke University assistant professor of computer science, worries about the possible down side -- privacy problems. … To delve deeper into these issues and begin the search for alternatives, Cox recently won a $498,000, three-year grant from the National Science Foundation. The funding is part of the federal stimulus package called the American Recovery & Reinvestment Act of 2009 (ARRA).” (“Seeking Privacy In The Clouds: Research Aims At Isolating Social Network Information From ‘Control Of A Central Entity,’” Science Daily, 10/15/09)

8. $380,000 TO SPAY AND NEUTER PETS IN WICHITA, KANSAS: “The City Recently Launched A $55,000 Project To Spay And Neuter Pets Owned By Low-Income Residents. Unwanted Pets Ultimately Cost $240 Apiece To Collect, Board And Euthanize, the city estimates, so the program covering 800 animals should save taxpayers money in the long run. The stimulative effect? That is harder to gauge. With the $380,000 overall Wichita has received from its share of the stimulus, the city estimates that it is directly funding 32 jobs so far. The bigger job producers, such as construction and transit projects, are due to start in the coming months.” (“The Challenge In Counting Stimulus Returns,” The Wall Street Journal, 10/27/09)

9. $3.4 MILLION FOR A TURTLE TUNNEL IN FLORIDA: “The Other Third Of The Stimulus, Government Infrastructure Spending, Has Been The Most Controversial From The Start. Some Proposals Have Been Criticized As Wasteful, Such As … A $3.4 Million ‘Ecopassage’ To Help Turtles Cross A Highway In Tallahassee, Fla.” (“The Challenge In Counting Stimulus Returns,” The Wall Street Journal, 10/27/09)

10. $30 MILLION FOR A SPRING TRAINING BASEBALL COMPLEX FOR THE ARIZONA DIAMONDBACKS AND COLORADO ROCKIES: “A Big Chunk Of The Money That Will Pay For A New Spring-Training Baseball Complex On Tribal Land In The East Valley Will Be Delivered Via A Financing Program That's Part Of The Federal Economic-Stimulus Plan. The Salt River Pima-Maricopa Indian Community says it may borrow as much as $30 million of the estimated cost of the $100 million complex near Scottsdale that will become the spring home of the Arizona Diamondbacks and the Colorado Rockies.” (“Stimulus To Help Tribe Build Baseball Complex,” The Arizona Republic, 9/17/09)

$24K per cash for clunker sold, and on $250K per job created. Such a deal. . . .

Stimulus Job Creation = Bigger Governmentby Veronique de Rugy

On Friday, in the name of holy transparency, the White House released the list of jobs created or saved with the stimulus funds. Now, let’s assume that the government can create jobs even though it can’t. Let’s assume that “job saved” is not the lamest excuse for government spending I have heard in my life time as a budget analyst. And let’s look at what this data means.

The White House claims that 640,329 were created or saved. That, by the way, is way less than what Christina Romer claimed would be created. Last week, she mentioned 1.4 million during a Joint Committee hearing. Remember.

First, $159 billion has been spent so far. That’s $248,273 per job.

However, when you look at some specific contracts that were awarded you find that some jobs were created or saved at an insane cost to taxpayers. For instance, $1,359,633,501 were awarded to CH2M WG IDAHO LLC, in WA to create 2,183 jobs. That’s $622,827 per job. That’s not as bad though as the $258,646,800 awarded to the Brookhaven Science Associates, LLC in NY, to create 25 jobs. That’s over $10.3 million per job.

I would be happy with one of these jobs.

Second, while the administration is promising good and in time reporting, we can see that it’s far from being the case. Agencies report having spent $207.3Billion and yet only $36,688,660,161 were reported by states. That’s a big gap, isn’t it?

Third, some 85 percent of the money went to 4 agencies: HHS, Labor, Education and Social Security. That money wasn’t spent on shovel ready projects. For instance, some of the HHS funds went to some rural high school and college students from Arkansas, Kentucky and Tennessee to conduct medical research this summer with a team of leading scientists at Vanderbilt University. The Department of Labor spent $11,058,877 in unemployment insurance (UI) modernization incentive funds to the state of West Virginia. And the Department of Education is mainly spending its money to keep union protected school teachers in their jobs. Not really shovel ready projects, are they?

But the most relevant information on Recovery.gov is that most of the jobs created or saved are in the public sector. For instance, according to Vice President Biden, out of the 640,329 jobs, 325,000 went to education and 80,000 to construction jobs. The difference we will soon find out is going to other government jobs.You need more evidence? 13,080 grants went to the private sector, and 116,625 went to feral agencies.

So even if we assume that the government could create jobs by spending our money, we can see that what this money is being spent on is big government. Or bigger government I should say.

So when you think that, on top of everything, the government can’t create jobs (here and here), this data is transparently depressing.

In the Battle for Stimulus Jobs, Shoe Store Owner Tells War StoryLouise Radnofsky reports on how the stimulus money is being spent.

How did Kentucky shoe store owner Buddy Moore save nine jobs with just $889.60 in federal stimulus money? He didn’t, and that’s turning into a big headache for him.

Moore’s store in Campbellsville, Ky., filed one of 156,614 reports from recipients of stimulus dollars designed to show how money from the $787 billion program is being spent, and how many jobs the funds have created or saved.

Moore’s slice of the stimulus came in an $889.60 order from the Army Corps of Engineers for nine pairs of work boots for a stimulus project.

Moore says he’s been supplying the Corps with boots for at least two decades. This year, because he provided safety shoes for work funded by the stimulus package, he said he got a call from the Corps telling him he had to fill out a report for Recovery.gov detailing how he’d used the $889.60, and how many jobs it had helped him to create or save. He later got another call, asking him if he’d finished the report.

“The paperwork was unreal,” said Moore, who added that he tried to figure out how to file the forms online, then gave up and asked his daughter to help.

Paula Moore-Kirby, 42 years old, had less trouble with the Web site, but couldn’t work out how to answer the question about how many jobs her father had created or saved. She couldn’t leave it blank, either, she said. After several calls to a helpline for recipients she came away with the impression that she would hear back if there was a problem with her response, and have a chance to correct it. So with 15 minutes to go before the reporting deadline, she sent in her answer: nine jobs, because her father helped nine members of the Corps to work.

“You could fill out the form in 10 minutes, but we were trying to fill out the form correctly,” she said, guessing that she spent up to eight hours on it in total.

That was a few weeks ago. The only thing the Moores heard after that was that because they’d received less than $25,000 in stimulus money, they shouldn’t have reported in the first place.

Today, three days after the reports were made public, local television stations and national newspapers including The Wall Street Journal started telephoning Moore, because his nine jobs for $889.60 in stimulus money makes him look like one of the most effective spenders in the country.

Kirby-Moore says she then got a call from her dad, asking her, ‘Paula, I thought you knew what you were doing… What did you put in that form?”

“I thought it was the right answer,” she said. “It is sad that creating nine jobs should get so much attention… If anybody’s looking for instant fame, I guess we’ve found the way.”

“The question, I would like to know is: How do you answer that? Did we create zero? Is it creating a job because they have boots and go out and work for the Corps? I would be really curious to hear how somebody does create a job. The formula is out there for anyone to create, and it’s just so difficult,” she said.

Republicans have criticized the Obama administration’s claims – based on forms like the one filed by Kirby-Moore — that the stimulus has created or saved 640,000 jobs. What counts, they say, are the number of Americans without jobs and the rising unemployment rate.

Nobody answered the phone at the U.S. Army Corps of Engineers in Louisville, Ky., this evening.

UPDATE: A spokeswoman for the Army Corps of Engineers in Louisville said that the stimulus reporting requirements were cumbersome, but important, and that the Corps had contracts ranging up to millions of dollars in the region. “It’s painstaking; it’s very, very detailed record keeping,” said Carol Labashosky. “We’re certainly up to the task, but if we inadvertently caused him some consternation, we apologize.”

More than $4.7 million in federal stimulus aid so far has been funneled to schools in North Chicago, and state and federal officials say that money has saved the jobs of 473 teachers.

Problem is, the district employs only 290 teachers.

"That other number, I don't know where that came from," said Lauri Hakanen, superintendent of North Chicago Community Unit Schools District 187.

The Obama administration last week released the first round of data designed to underpin the worthiness of its economic stimulus plan, which so far has directed $1.25 billion to Illinois schools. That money has helped save or create 14,330 school jobs in the state, the administration claimed.

But those statistics, compiled initially by the Illinois State Board of Education, appear riddled with anomalies that raise questions about their validity, according to a Tribune analysis of district-by-district stimulus spending and other state data. Many local school officials were perplexed by the stimulus data attributed to their districts.

In the official report, Wilmette Public Schools District 39 was credited with 166 jobs saved by stimulus aid. Superintendent Raymond Lechner said the number should be zero.

At Dolton-Riverdale School District 148, stimulus funds were said to have saved the equivalent of 382 full-time teaching jobs -- 142 more than the district actually has.

A similar discrepancy was found in data for Kankakee School District 111, where the stimulus report logged the equivalent of 665 full-time jobs saved. "That's impossible," a top Kankakee school official said, adding that the entire payroll -- full and part time -- is 600 workers.

But if that suggests the numbers for Illinois may be artificially inflated, then consider the following, which could suggest an undercount:

The totals do not reflect any school jobs saved or created in Chicago, the state's biggest district and the recipient of at least $293 million in stimulus funds. Chicago schools budget chief Christina Herzog said the district easily saved at least 1,200 jobs because of the stimulus, but didn't report them as such because of directives from the state board. State officials dispute that.

The district-specific data, obtained through the Freedom of Information Act, also underscore how little of the money has been spent to expand educational opportunities. Statewide, districts reported using most of their stimulus funds to prevent layoffs, with the equivalent of just 222 full-time jobs added to payrolls.

Last week's stimulus report came against the backdrop of a raging debate over the wisdom of President Barack Obama's entire $787 billion stimulus program. Critics on the right contend it has ballooned the deficit while failing to rapidly revive the economy. The administration said the stimulus was designed to build a lasting recovery and has helped avert an even more drastic downturn.

Problems with the Illinois stimulus data illustrate how difficult it is to benchmark the impact of so sprawling an initiative. Many districts were unclear about what they should report. And there also may have been confusion over how the data were collated once the figures arrived at the state level.

It appears the state treasury -- not students or school districts -- was the prime beneficiary of the education stimulus jackpot in Illinois. In great measure, funds simply were used to replace general aid payments already owed to local districts by the state. That gave Gov. Pat Quinn breathing room in his struggle to rein in a whopping two-year budget deficit of more than $10 billion.

Confusion reigns over why the numbers for many districts appear so off. Responsibility for collecting data and sending the figures to Washington fell to Quinn's office, which turned the task over to the state board.

Board spokesman Matt Vanover said the data might be flawed and said the information was only as good as the numbers sent in by local districts. But officials of several districts contacted by the Tribune insisted they never provided the state with the jobs numbers used in the official tabulation.

Herzog said the jobs saved in the city weren't reflected in official paperwork because the state directed that layoff notices had to have at least been served and then rescinded before jobs could be counted as retained.

Vanover said Chicago received the same guidance as every other district in the state, but apparently interpreted it differently.

Chicago's omission from the stimulus data is not without irony. The federal overseer of school stimulus spending is U.S. Education Secretary Arne Duncan, who until early this year was the CEO of the Chicago schools.

Sandra Abrevaya, a spokeswoman for Duncan, said the discrepancies the Tribune uncovered in Illinois jobs data are "really troubling" and would be investigated and corrected if necessary. Still, she said, similar jobs reports from other states appear more solid.

"At this point, the department feels good about the number overall," she said.

Some local school officials suggested that the jobs data sent to the state appeared to have been overcounted in the official tabulation.

Last spring, Dolton-Riverdale received $3.6 million in stimulus money and reported to the state that the money saved 181 teaching jobs. A follow-up report this fall on another installment of $750,000 brought the total to 201. The official state report states that stimulus money saved 382 jobs.

But Carolyn Keith, the district's comptroller, said the data from the two reports overlap and should not be added together.

The report from the state board listed jobs being retained or created thanks to the stimulus in 348 local districts, but more than half that total was concentrated in just 35 districts.

By contrast, the numbers reported for many districts -- even big ones -- were conservative. Naperville Community Unit School District 203, with 18,000 students, reported just six jobs created with stimulus money.

In Schaumburg-based School District 54, Superintendent Ed Rafferty said the state's estimate of 250 jobs preserved or created was accurate, though more than half belonged to a multidistrict preschool program that includes District 54.

Just a handful of the jobs were new, Rafferty said, and he warned that every position propped up by stimulus money would be in jeopardy when the program expires. "Unless there's a guarantee of continuation of (federal or state) money, the vast majority of these will be eliminated because there won't be local resources to fund them," he said.

And a second one today. The gall of some of those spinning this bad math is appalling:

STIMULUS WATCH: Salary raise counted as saved jobBy BRETT J. BLACKLEDGE and MATT APUZZO – 15 hours agoWASHINGTON — President Barack Obama's economic recovery program saved 935 jobs at the Southwest Georgia Community Action Council, an impressive success story for the stimulus plan. Trouble is, only 508 people work there.The Georgia nonprofit's inflated job count is among persisting errors in the government's latest effort to measure the effect of the $787 billion stimulus plan despite White House promises last week that the new data would undergo an "extensive review" to root out errors discovered in an earlier report.About two-thirds of the 14,506 jobs claimed to be saved under one federal office, the Administration for Children and Families at Health and Human Services, actually weren't saved at all, according to a review of the latest data by The Associated Press. Instead, that figure includes more than 9,300 existing employees in hundreds of local agencies who received pay raises and benefits and whose jobs weren't saved.That type of accounting was found in an earlier AP review of stimulus jobs, which the Obama administration said was misleading because most of the government's job-counting errors were being fixed in the new data.The administration now acknowledges overcounting in the new numbers for the HHS program. Elizabeth Oxhorn, a spokeswoman for the White House recovery office, said the Obama administration was reviewing the Head Start data "to determine how and if it will be counted."But officials defended the practice of counting raises as saved jobs."If I give you a raise, it is going to save a portion of your job," HHS spokesman Luis Rosero said.The latest stimulus report, released Friday, significantly overstates the number of jobs spared with money from programs serving families and children, mostly the Head Start preschool program. The report shows hundreds of the programs used nearly $323 million to provide pay raises and other benefits to their existing employees.The raises themselves were appropriate — the stimulus law set aside money for Head Start salary increases — but converting that number into jobs proved difficult. The Obama administration told Head Start officials to consider a fraction of each employee as a job saved."That's more than ridiculous," said Antonia Ferrier, a spokeswoman for Republican House Minority Leader John Boehner.Many Head Start programs around the country went further, counting everyone who received a raise as a job saved."It's a glitch in the system," said Ben Allen, the research director at the National Head Start Association. "There was some misunderstanding among some in the Head Start community about completing the reporting requirements."Allen said a cost-of-living adjustment "may not be viewed traditionally as a job saved, but one could interpret it that, by providing COLA, you're retaining staff."The Bergen County Community Action Program in Hackensack, N.J., noted the nearly $213,000 it received went to cover raises for existing staff only, but it also reported saving 85 jobs.At Southwest Georgia Community Action Council in Moultrie, Ga., director Myrtis Mulkey-Ndawula said she followed the guidelines the Obama administration provided. She said she multiplied the 508 employees by 1.84 — the percentage pay raise they received — and came up with 935 jobs saved."I would say it's confusing at best," she said. "But we followed the instructions we were given."Ed DeSeve, who oversees the stimulus at the White House, said the Head Start numbers "represent a few percent of all jobs reported" and said the problems would probably be balanced out by other errors that underreported jobs."So we don't expect any corrections to this data to meaningfully impact the total 640,000 direct jobs," DeSeve said.More than 250 other community agencies in the U.S. similarly reported saving jobs when using the money to give pay raises, to pay for training and continuing education, to extend employee work hours or to buy equipment, according to their spending reports.Other agencies didn't count the raises as jobs saved, reporting zero jobs.Last week's stimulus report claimed 640,000 jobs saved or created by the economic recovery plan so far. Those jobs came from 156,614 federal contracts, grants and loans awarded to more than 62,000 recipients, worth a total of $215 billion.Obama has promised the stimulus would save or create 3.5 million jobs by the end of next year, and the data released Friday represented the first head count toward that goal.

Obama's accountants are beginning to look like a long line of mathematicians getting out of a clown car. . . .

Don't count on stimulus job tally

Many employment reports from sources in Wisconsin are inflated

By Ben Poston of the Journal Sentinel

Posted: Nov. 5, 2009

A stimulus job report that says more than 10,000 jobs were saved or created in Wisconsin is rife with errors, double counting and inflated numbers based more on satisfying federal formulas than creating real jobs, a Journal Sentinel review has found.

In one case, five jobs were mistakenly listed as 50 - and then counted twice. In another, pay raises to workers were listed as saving more than 100 jobs. And in another, jobs were listed as saved even though the money had not been received and no work on the project had begun.

The problems mirror those surfacing around the country, as the federal numbers claiming 640,000 jobs created or saved by stimulus money are being scrutinized.

Among the Journal Sentinel's findings:

Double-counted jobs: About $7.3&enspmillion of federal money will flow to the Parkland Sanitary District in Douglas County to replace its sewer system, a project listed as creating or saving 100 jobs even though work won't start until this spring, federal recovery data shows.

But that number is inflated by 95 jobs, Parkland Sanitary District treasurer Eric Shaffer admitted.

When reporting to the U.S. Department of Agriculture's online reporting system, Schaffer meant to type "5" but mistakenly added a zero - and that 50-job figure appears twice in the federal data because it was a combined grant and loan. He tried to correct the error, but was told it was too late for the federal reporting deadline.

"We are volunteers, and we made a mistake," Shaffer said. "It was a simple typographical error, and we tried to fix it. Now that we understand the system, it will be much easier."

Meanwhile, three other Wisconsin towns reported jobs on combined federal loans and grants that were counted twice, doubling their totals from 35 to 70 jobs, records show.

Any erroneous job figures won't be corrected until January, said Ed Pound, communications director at the federal Recovery Accountability and Transparency Board, the oversight panel for stimulus money.

"Recipients are going to make mistakes, and we've had a fair number of those," Pound said. "But we said from the very beginning, there were going to be errors because this is the first time people have done this. It's just not surprising."

Pay raises: United Migrant Opportunity Services based in Milwaukee reported saving 113 jobs through spending $18,000 of a Head Start preschool grant, or about $160 per job. The award provided their employees a 1.8% cost-of-living wage increase. The nonprofit provides services to migrant farm workers in Wisconsin and other states.

"We think the 113 jobs were preserved, but more importantly, the quality of teachers and Head Start child development staff was maintained," UMOS spokesman Rod Ritcherson said.

In total, 157 jobs were reported saved as part of 17 Head Start grants in Wisconsin, all attributed to cost-of-living increases.

A spokesman for the U.S. Department of Health and Human Services, Luis Rosero, said the Head Start pay raises "are still under review to determine how and if estimates will be counted. We continue to work with recipients to update and correct their estimates."

Murky numbers: Nearly half the jobs reported in Wisconsin - 4,670 - came from preserving teaching, administrative and custodial positions at schools, according to the Wisconsin Department of Public Instruction.

For instance, Milwaukee Public Schools said 996 jobs were saved by the $75.8&enspmillion it received in state stabilization money. Those saved jobs represent about 9% of the district's total staff.

Without the boost in funding, MPS would have faced a budget shortfall, but it's unlikely to have been resolved exclusively through staff layoffs, MPS finance director Ron Vavrik said.

"We would have had to make severe cuts both in personnel and programs," he said. "No matter what would happen, there is no way we could have avoided cutting positions. It might have been more; it might have been less."

Hard to verify

Last Friday, the White House reported that about 640,000 jobs were created or saved by the stimulus package. The numbers, however, are difficult to verify because of the guesswork involved in determining whether businesses had used stimulus funding to retain workers who otherwise would have been laid off.

Tom Schatz, president of Citizens Against Government Waste, a national watchdog group, questions the legitimacy of the job figures in Wisconsin and other states.

"It's difficult to believe because the quality of the information is questionable," Schatz said. "There is no penalty for reporting inaccurately. It certainly has raised questions in the taxpayers' minds about what kind of value they are getting for the stimulus."

Chris Patton, policy director for Gov. Jim Doyle, defended the quality of the information submitted by the state. The Journal Sentinel found no problems with state-submitted data, but rather information that contractors, agencies and local governments reported directly to the federal government.

"I think we have a high degree of quality now and on future reporting periods," Patton said. "We can't speak to any inconsistencies outside of the state data."

Schatz criticized the stimulus package, saying it just preserves existing government and education jobs.

"It's just bailing out the states," he said. "They are not taking steps they should to reduce waste and spending. It really just postpones the day they will have to make tough decisions."

"Without the recovery funding, we would have been faced with a $550&enspmillion cut to educational funding that would have had dramatic impacts like layoffs and skyrocketing tax levies," he said.

The newspaper's analysis found other inconsistencies:

•&enspC3T Construction Co., a general contracting company in Milwaukee, listed 24 jobs retained for projects on which no work had begun and no stimulus money had been received, records show. The company got more than $7&enspmillion for five contracts, including replacing the roof and fire-alarm systems at the Milwaukee Veterans Affairs Medical Center.

C3T Vice President Jim Hubbell said the number represented a projection of full-time jobs retained for the duration of the projects.

•&enspOwners at five Section 8 housing complexes in Madison and Milwaukee reported saving 38 jobs with more than $540,000 in additional rental assistance for low-income residents, though they acknowledged no new jobs were created.

For instance, $117,000 in federal Housing and Urban Development money went to 3700 Green Tree Corp., a subsidized housing project on Milwaukee's northwest side, which reported saving 16 jobs.

Carmen Porco, housing director at Green Tree, said there would have been only five job losses if not for the stimulus money. However, getting that money allowed the housing complex to continue its operations, he said.

"Where was it written that the only purpose of the stimulus was to create jobs?" Porco said. "What was really at stake was the rental assistance for residents - that's a significant issue because they continue to live in the apartment and not on the street."

Andrea Mead, spokeswoman for the U.S. Department of Housing and Urban Development, said project-based rental assistance is a longstanding federal program that had become underfundedand was supplemented with stimulus money.

Indirect impact

Officials are touting more than just the direct jobs created or saved, also pointing to harder-to-quantify "indirect" and "induced" jobs.

For instance, according to the state, some 470 jobs have been created or saved so far by road and bridge projects funded with grant money from the Federal Highway Administration.

The state Transportation Department estimates the "total employment impact" at 974 if direct, indirect and induced jobs are counted, according to federal data. Likewise, the federal government claims about 1&enspmillion jobs have been created or saved through the stimulus spending when viewed this way.

An indirect job includes one created by an asphalt plant that supplied material for a road construction project. An example of an induced job: A waitress at a restaurant where construction workers eat lunch.

More than $10&enspmillion spent so far on the I-94 widening project in Kenosha County has created 45 jobs so far, Transportation Department data shows. But the department puts the total employment impact of the interstate project at more than twice that - 113 jobs - if indirect and induced jobs are counted.

"Obama's accountants are beginning to look like a long line of mathematicians getting out of a clown car. . ."

When they cleverly invented that turn of phrase, created or saved, we were put on notice that there would be no real accounting for the results of the trillions and that they already knew there may be no net job creation whatsoever in the private sector.

If the purpose of the public investment is to jump-start the PRIVATE economy, the only job creation that count are new, real jobs in the private sector that stand on their own AFTER the stimulus is done.

At this point it will take hope, change and a conservative takeover of the government to get that number back up to ZERO.

A federal bailout of AIG last year attracted angry protesters who for weeks gathered outside the insurance giant's headquarters in New York and stalked company executives at their homes.

But there has been little response to the bailout of Peter Miller, who runs a two-person lobster-fishing crew in Maine.

Miller, who gets 50 cents on the dollar for his catch these days, a few months ago received a $35,000 loan from a new Small Business Administration program that was crafted in February during final negotiations on the federal stimulus package. The loan program offers an unprecedented 100 percent guarantee to banks, vs. the SBA's standard 75 percent. The loans' anticipated default rate is 60 percent, compared with the agency's average 10 percent. And all of the funds must be used to repay other delinquent loans -- another first for the SBA.

"Logic tells you this is a bad idea. By definition these businesses are already failing, but we are lacking standards right now; our world has been turned upside down," said Barry Bosworth, an economist with the Brookings Institution.

Just how $255 million in federal funds was set aside for the program -- called American Recovery Capital -- is a classic Washington story.

When Congress negotiated the final details of the American Recovery and Reinvestment Act, Democrats needed to secure a few key votes from Republican colleagues for the stimulus bill to pass. This allowed Sen. Olympia J. Snowe (R-Maine) to ask for a few concessions -- including a loan program aimed at helping her home state's ailing lobster industry.

The small-business owners in this industry are fishermen whose companies typically consist of little more than a boat, some traps and a small crew.

And their attitudes about the big guys' bailouts -- coupled with complaints that the SBA rescue for them may be too risky -- are shaping a new conversation as the money rolls out to a variety of small businesses.

"The way I feel about it is if we all default, it's just a drop in the bucket compared to what they gave AIG," said Miller, whose son also owns a lobster boat and who also secured his own SBA loan. "We're not looking for charity. We will work hard to pay it back."

Snowe also defended the program as a crucial "lifeline" to small businesses during "this particularly difficult economic time." But Snowe said she was troubled by the estimated default rate of 60 percent and hoped the SBA would take "corrective action" to ensure that only "viable" businesses receive the funds, as the legislation stipulates.

For their part, SBA officials said their borrower requirements are already so strict that they face growing criticism from the small-business community for creating too many barriers to the money. The first loan wasn't made until June, and so far $121.9 million of the $255 million has gone to 3,767 business owners.

The biggest problem that economists see with such rescue programs is over the long haul. The SBA loan is supposed to be a one-time thing, set to expire as soon as the money is doled out, which should be some time next year.

But how will federal agencies and Congress roll back such programs if there has been no economic rebound by that time? What about when things do bounce back?

Bosworth and other economists said history shows that taking away such programs can be difficult. As evidence, they cite programs that have lingered long past their sunset dates, such as the Agriculture Department's production flexibility contracts (now called direct payments) in the 1996 Freedom to Farm Act. That program was supposed to phase out over seven years as farmers transitioned to a market system that did not rely on government subsidies. More than 1 million farmers who received the original payments continue to receive them, according to data from the Environmental Working Group.

"When the crisis is over, we will have to find a way to clean up this mess," Bosworth said. "But how the hell are we going to turn this back to common sense again?"

One of the benchmark portions of the stimulus was the $25 billion devoted tocreating green jobs. Professor Obama imagined a world of greener buildings and greenjobs miraculously sprouting all across the fruited plains. So, he dumped $25 billioninto painting shingles white and whatever else it is they do to 'green' buildings.The result? Zero jobs. Just another government 'success' story. READhttp://hotair.com/archives/2009/11/09/25-billion-stimulus-program-produces-0-jobs/